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- Fri Nov 13, 2015 7:03 pm
- Forum: Econometric Discussions
- Topic: Is AR(1)-ARCH(1) covariance stationary? And why?
- Replies: 0
- Views: 1936
Is AR(1)-ARCH(1) covariance stationary? And why?
I'm becoming confused by this. Say I have the following model: y_t = c + ϕy_{t−1} + ϵ_t, ϵ_t|Ω_{t−1} ~ WN(0,σ^2_t) σ^2_t = α_0 + α_1 + ϵ^2_{t−1} |ϕ|<1, α_1<1, α_0≥0, α1>0. I know that an AR(1) is covariance stationary if |ϕ|<1 . I also know that an ARCH(1) is covariance stationary if α_0>0, α_1>0 an...