You could look into ARCH-series of volatility models, in particular E-GARCH model presented in this paper:
Nelson, Daniel B. "Conditional Heteroskedasticity in Asset Returns: A New
Approach." Econometrica 59.3 (1991): 347-370.
I recall using the E-GARCH model a few years ago to test for asymmetric effects in oil price shocks, but I can't recall how to implement it in Stata, although the Help function should provide some background.
-----Original Message-----
From: [email protected] [mailto:[email protected]] On Behalf Of David Jacobs
Sent: 2009-12-16 3:48 PM
To: [email protected]
Subject: Re: st: estimating an asymmetrical relationship
Hi Gisella:
If you ever find out what is the matter with my suggestion from your
colleague, shoot me an e-mail at [email protected].
I'm curious why it might be incorrect.
Dave Jacobs
.
At 03:31 AM 12/16/2009, you wrote:
>Thank you very much Nick and David for your thoughtful and helpful replies.
>
>On Nick's point about whether I need a model that treats
>my variables as linked time series or whether I am lumping together data
>without regard to time, I am not sure whether I understand this
>correctly and maybe I am exposing my ignorance here, but I am
>estimating a normal (?) time series model, so the observations have
>dates but I am not doing any explicit linking... One can look at
>this relationship in terms of economic theory and there are
>explanations, but what I need to do here is empirically test whether
>there is an asymmetry for a particular country over a particular
>time period. I haven't found literature that econometrically tests
>for this type of asymmetrical relationship in other contexts, which
>is why I am struggling about the correct way of doing it.
>
>On David's suggestion of dummies for the different periods
>(increasing and decreasing of thee explanatory variable), actually
>this was something I considered but was told my an econometrician
>colleague that this was wrong (not sure why) and that only a
>nonlinear estimation would be appropriate. I would be interested in
>hearing the views of other list members on this?
>
>Or alternatively, a suitable way of specifying and testing the
>relationship in STATA, whether using OLS or nonlinear specification?
>
>Thank you!!!!
>
>Gisella
>
>--- On Tue, 12/15/09, David Jacobs <[email protected]> wrote:
>
> > From: David Jacobs <[email protected]>
> > Subject: Re: st: estimating an asymmetrical relationship
> > To: [email protected]
> > Date: Tuesday, December 15, 2009, 6:18 PM
> > Gisella, how about this technique
> > (and let's see what others on the list say about it, as it's
> > been a while since I thought about this issue)?
> >
> > Construct a dummy coded 1 if there's growth in the
> > explanatory variable of interest and construct another if
> > there's negative change. Multiply each dummy with the
> > explanatory variable of interest thereby creating two
> > interacted explanatory variables. Enter both product
> > terms in a model. If there's a statistically
> > significant difference between the coefficients on the two
> > interacted terms, that should provide evidence that you
> > indeed have asymmetric effects.
> >
> >
> > At 11:55 AM 12/15/2009, you wrote:
> > > This question is partly econometric and partly STATA,
> > and I would greatly appreciate any advice. I need to
> > estimate a relationship which I believe to be asymmetric -
> > between growth as the explanatory variable of interest and
> > unemployment as the dependent variable. Asymmetric in the
> > sense that, while overall I expect a negative relationship,
> > I expect the magnitude of the relationship to be higher when
> > growth is going down than when it is going up (for reasons
> > not necessary to go into here). That is, I expect the
> > coefficient on the relationship to be higher during periods
> > of high or increasing growth than during periods of low or
> > decreasing growth (I realise that high and increasing is not
> > the same thing but I will later figure out which). So I
> > believe that OLS is not appropriate as it will not pick up
> > these differences, and what I am really interested in
> > investigating is whether there is asymmetry and how strong
> > it is. Ideally I would like to get
> > > different coefficients for the 2 types of
> > periods (note that this is not one long period and then
> > another long period, but ups and downs). I believe that I
> > need a nonlinear estimation method to do this. But beyond
> > that I am not sure how to proceed and would be terribly
> > grateful for any suggestions.
> > >
> > > Thank you very much.
> > >
> > > Gisella
> > >
> > >
> > >
> > > *
> > > * For searches and help try:
> > > * http://www.stata.com/help.cgi?search
> > > * http://www.stata.com/support/statalist/faq
> > > * http://www.ats.ucla.edu/stat/stata/
> >
> >
> > *
> > * For searches and help try:
> > * http://www.stata.com/help.cgi?search
> > * http://www.stata.com/support/statalist/faq
> > * http://www.ats.ucla.edu/stat/stata/
> >
>
>
>
>
>*
>* For searches and help try:
>* http://www.stata.com/help.cgi?search
>* http://www.stata.com/support/statalist/faq
>* http://www.ats.ucla.edu/stat/stata/
*
* For searches and help try:
* http://www.stata.com/help.cgi?search
* http://www.stata.com/support/statalist/faq
* http://www.ats.ucla.edu/stat/stata/
*
* For searches and help try:
* http://www.stata.com/help.cgi?search
* http://www.stata.com/support/statalist/faq
* http://www.ats.ucla.edu/stat/stata/
