They employed generalised autoregressive conditional heteroskedasticity (GARCH) and vector autoregressive (VAR) model, and found little support on the subsistence of the relationship between macroeconomic volatilities and stock market volatility.
39 (a) Columns A and B denote exchange volatility measured from the Generalized Autoregressive Conditional Heteroskedasticity (GARCH)(1,1) model and the moving average (MA) model, respectively.
Most of the literature on the international interactions of stock returns, foreign exchange rate changes and volatility spillovers employ Generalized Autoregressive Conditional Heteroskedasticity (GARCH) models (Bollerslev, 1986).
Since the OLS does not consider autoregressive conditional heteroskedasticity, its residual variance is likely to be biased, and hypothesis tests are invalid.
We propose three alternative specifications of expected future beta based on the past information on realized beta using autoregressive, moving average, and generalized autoregressive conditional heteroskedasticity (GARCH)-in-mean models to obtain time-varying conditional betas for each stock.