unrestricted version of bivariate BEKK of Engle and Kroner

[jill_lr]

i am new to e-views programming and encountering a bug in my program. i am using daily return of stock price and trying to run an unrestricted version of bivariate BEKK with codes below. however, i am getting an error which says "positive or non-negative argument to function in scalar lr_pval = 1 - @cchisq(lr,1)".
i would appreciate if you can help me answer why i am getting such error.

thanks so much!

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' BV_GARCH.PRG (3/30/2004)
' example program for EViews LogL object
'
' unrestricted version of
' bi-variate BEKK of Engle and Kroner (1995):
'
' y = mu + res
' res ~ N(0,H)
'
' H = omega*omega' + beta H(-1) beta' + alpha res(-1) res(-1)' alpha'
'
' where
'
' y = 2 x 1
' mu = 2 x 1
' H = 2 x 2 (symmetric)
' H(1,1) = variance of y1 (saved as var_y1)
' H(1,2) = cov of y1 and y2 (saved as var_y2)
' H(2,2) = variance of y2 (saved as cov_y1y2)
' omega = 2 x 2 low triangular
' beta = 2 x 2
' alpha = 2 x 2
'

'change path to program path
%path = @runpath
cd %path


' dependent variables of both series must be continues
smpl @all
series y1 = sensex_det_ret
series y2 = spx_det_ret

' set sample
' first observation of s1 need to be one or two periods after
' the first observation of s0
sample s0 1/02/2005 5/21/2014
sample s1 1/03/2005 5/21/2014


' initialization of parameters and starting values
' change below only to change the specification of model
smpl s0

'get starting values from univariate GARCH
equation eq1.arch(m=500,c=1e-5) y1 c
equation eq2.arch(m=500,c=1e-5) y2 c

' declare coef vectors to use in bi-variate GARCH model
' see above for details
coef(2) mu
mu(1) = eq1.c(1)
mu(2)= eq2.c(1)

coef(3) omega
omega(1)=(eq1.c(2))
omega(2)=0.01
omega(3)=(eq2.c(2))

coef(4) alpha
alpha(1) = (eq1.c(3))
alpha(2) = 0
alpha(3) = 0
alpha(4) = (eq2.c(3))

coef(4) beta
beta(1)= (eq1.c(4))
beta(2)= 0
beta(3) = 0
beta(4)= (eq2.c(4))

' constant adjustment for log likelihood
!mlog2pi = 2*log(2*@acos(-1))

' use var-cov of sample in "s1" as starting value of variance-covariance matrix
series cov_y1y2 = @cov(y1-mu(1), y2-mu(2))
series var_y1 = @var(y1)
series var_y2 = @var(y2)

series sqres1 = (y1-mu(1))^2
series sqres2 = (y2-mu(2))^2
series res1res2 = (y1-mu(1))*(y2-mu(2))


' ...........................................................
' LOG LIKELIHOOD
' set up the likelihood
' 1) open a new blank likelihood object (L.O.) name bvgarch
' 2) specify the log likelihood model by append
' ...........................................................

logl bvgarch
bvgarch.append @logl logl
bvgarch.append sqres1 = (y1-mu(1))^2
bvgarch.append sqres2 = (y2-mu(2))^2
bvgarch.append res1res2 = (y1-mu(1))*(y2-mu(2))

' calculate the variance and covariance series
bvgarch.append var_y1 = omega(1)^2 + beta(1)^2*var_y1(-1)+beta(1)*beta(3)*cov_y1y2(-1)+beta(1)*beta(3)*cov_y1y2(-1)+beta(3)^2*var_y2(-1) + alpha(1)^2*sqres1(-1)+alpha(1)*alpha(3)*res1res2(-1)+alpha(1)*alpha(3)*res1res2(-1)+alpha(3)^2*sqres2(-1)

bvgarch.append var_y2 = omega(3)^2+omega(2)^2 +beta(4)^2*var_y2(-1)+beta(4)*beta(2)*cov_y1y2(-1)+beta(4)*beta(2)*cov_y1y2(-1)+beta(2)^2*var_y1(-1) + alpha(4)^2*sqres2(-1)+alpha(4)*alpha(2)*res1res2(-1)+alpha(4)*alpha(2)*res1res2(-1)+alpha(2)^2*sqres1(-1)

bvgarch.append cov_y1y2 = omega(1)*omega(2) + beta(2)*beta(1)*var_y1(-1) + beta(3)*beta(2)*cov_y1y2(-1) + beta(1)*beta(4)*cov_y1y2(-1) + beta(4)*beta(3)*var_y2(-1) + alpha(2)*alpha(1)*sqres1(-1) + alpha(4)*alpha(1)*res1res2(-1) + alpha(3)*alpha(2)*res1res2(-1) + alpha(4)*alpha(3)*sqres2(-1)

' determinant of the variance-covariance matrix
bvgarch.append deth = var_y1*var_y2 - cov_y1y2^2

' inverse elements of the variance-covariance matrix
bvgarch.append invh1 = var_y2/deth
bvgarch.append invh3 = var_y1/deth
bvgarch.append invh2 = -cov_y1y2/deth

' log-likelihood series
bvgarch.append logl =-0.5*(!mlog2pi + (invh1*sqres1+2*invh2*res1res2+invh3*sqres2) + log(deth))

' remove some of the intermediary series
' bvgarch.append @temp invh1 invh2 invh3 sqres1 sqres2 res1res2 deth


' estimate the model
smpl s1
bvgarch.ml(showopts, m=500, c=0.001)

' change below to display different output
show bvgarch.output
graph varcov.line var_y1 var_y2 cov_y1y2
show varcov

' LR statistic for univariate versus bivariate model
scalar lr = -2*( eq1.@logl + eq2.@logl-bvgarch.@logl)
scalar lr_pval = 1 - @cchisq(lr,1)
jill_lr

Joined: Wed Jul 02, 2014 11:39 pm