OK, while trying to write code, I realized that I do not fully understand this. When you say "calculated on previous 36 months of squared demeaned rt", does this mean that squared demeaned rt replace sigma2 in the equation of #13 or that it replaces u2.
Also, the equation shown in #13 is recursive: the value in time period n is calculated from the results for time period n-1. But to make this work, there has to be some starting value to use in the first time period. Your screenshot table shows blanks (missing values) in the first row--but that will just lead to missing values for all observations when the recursion begins. There must be some values that are stipulated for the first observation.
Also, I was assuming that the 0.06 shown in row 3 in the screenshot's w column is the 1- lambda (because lambda = 94%). But then what are the values of w in the remaining rows? I was expecting to see powers of 0.06, but that is not the case.
Also, the equation shown in #13 is recursive: the value in time period n is calculated from the results for time period n-1. But to make this work, there has to be some starting value to use in the first time period. Your screenshot table shows blanks (missing values) in the first row--but that will just lead to missing values for all observations when the recursion begins. There must be some values that are stipulated for the first observation.
Also, I was assuming that the 0.06 shown in row 3 in the screenshot's w column is the 1- lambda (because lambda = 94%). But then what are the values of w in the remaining rows? I was expecting to see powers of 0.06, but that is not the case.
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