EGARCH - Exchange Rates
Posted: Fri Apr 10, 2015 6:02 am
Hi, I am currently studying econometrics and wanted some clarification and confirmation I am on the right lines.
I wanted to initially see the impact on exchange rate movements on the stock market, so from reading I realised that I needed to use the egarch method but I am not entirely sure if I am on the right lines. I have estimated the following output Ibovespa Index ( daily % change in returns) c and Brl per USD (daily % Change in exchange rate), where by I added BRL per USD in the variance equation, but I am not sure on how to interpret the output attached called Egarch 1.
Also the second attachment (egarch 2), I have just estimated brl per usd c, am I right to assume that C(4) which is the leverage effect information, implies that an increase in brl per usd (depreciation of Brazilian real) has a higher implied volatility on future exchange rates then the opposite.
I appreciate the clarification
I wanted to initially see the impact on exchange rate movements on the stock market, so from reading I realised that I needed to use the egarch method but I am not entirely sure if I am on the right lines. I have estimated the following output Ibovespa Index ( daily % change in returns) c and Brl per USD (daily % Change in exchange rate), where by I added BRL per USD in the variance equation, but I am not sure on how to interpret the output attached called Egarch 1.
Also the second attachment (egarch 2), I have just estimated brl per usd c, am I right to assume that C(4) which is the leverage effect information, implies that an increase in brl per usd (depreciation of Brazilian real) has a higher implied volatility on future exchange rates then the opposite.
I appreciate the clarification