[R-SIG-Finance] Adding external regressors on conditional variance model

Assis Duraes assis.duraes at gmail.com
Thu Aug 20 15:57:38 CEST 2015


first of all I would like to thanks for the rugarch package. it is really
useful and a very nice package.

I am investigating the effect of external variables on conditional variance
models forecasts. more specifically, I am would like to check if the
addition of implied volatility and realized variance as external regressors
on a GJR (1,1) model somehow enhance the daily volatility forecasts of it.

Looking for a tool to help modelling it I found the rugarch package, and
started looking into it. In fact, at this point, I believe I have a very
basic question. but did not find an answer on previous posts or in the
package documentation.

Should I inform the external regressors matrix in model spec already lagged
or not? I imagine, yes, since I did not find in any place where specify the
lags for those regressors, but would like to confirm. In case affirmative,
If I want to use a same variable with different lags I need to inform it
multiple times, obviously with different lags, in external.regressors
matrix, correct?

My apologies in advance if it is explained somewhere, but as I explained, i
search without much success..

Thanks in advance for any help with that,

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