The estimation output of DVEC model
Posted: Sun Jan 27, 2013 7:38 pm
by liyanan
Hi,
The diagonal vec garch model should be resitriced A and G matrix (the parameter of ARCH and GARCH effect) to be diagonal, why EViews estimation output also report the off-diagonal elements?
Thanks
Re: The estimation output of DVEC model
Posted: Mon Jan 28, 2013 1:07 am
by trubador
Those parameters do not correspond to the off-diagonal elements of the unrestricted system matrices. In the estimation process, calculations are carried out with Hadamard (element-by-element) product. Hence, this is just a difference in the notation. Normally, a bivariate VECH(1,1) model requires 27 parameters to be estimated, whereas diagonal VECH restricts it down to 9 parameters.
Re: The estimation output of DVEC model
Posted: Mon Jan 28, 2013 10:09 am
by liyanan
Thank you very much. I also just figure it out when I read the Engle and Kroner (1995). the
Those parameters do not correspond to the off-diagonal elements of the unrestricted system matrices. In the estimation process, calculations are carried out with Hadamard (element-by-element) product. Hence, this is just a difference in the notation. Normally, a bivariate VECH(1,1) model requires 27 parameters to be estimated, whereas diagonal VECH restricts it down to 9 parameters.