Including lags of variance in mean equation

[strypste]

Hi all

I would like to estimate a GARCH-M model with a lag of the variance in the mean equation. Is this possible?

So the model would look like:

y_t = c + lambda_1*sigma_t + lambda_2 *sigma_t-1 + epsilon_t

where

sigma^2_t = omega_0 + omega_1*epsilon^2_t-1 + gamma_1*sigma^2_t-1

Cheers!
S

[Zappa_F]

Of course that's possible!

What's your code you've written so far?

Z

[strypste]

This is a simplified version of my model...

equation GARCH11M.arch(1,1,archm=sd) c

Is it possible to add something to get the lagged variance in the mean equation?

S

PS Sorry for the very late reply.. I dropped the project, but am now interested again..