E
erinnc
Member
I am having trouble recreating the equity dividend yield equation (lnY(t)) in the Wilkiw model as it appears in the VARMA representation on pages 31-32 of Section 9 (Stochastic models of security prices).
Specifically I'm getting stuck on the co-efficient of QZ(t) which is shown in matrix B0 as QSD. I am getting YW.QSD.
I have not had any trouble getting to equation (2b) on age 28 of the notes;
lnY(t) = {YW.I(t) + lnYMU} + YA.[lnY(t-1) - {YW.I(t-1) + lnYMU}] + YSD.YZ(t)
From there I substitute the equation for I(t) and simplify / rearrange to find the coefficients for the matricies.
lnY(t) = {YW.[QMU+ ... + QSD.QZ(t)] + lnYMU} + ....
Because I(t); which is the source of the QZ(t) term, is multiplied by YW I can't see how it simplifies to QSD.QZ(t) alone?
I realise that this is probably going into detail which is beyond the scope of the course, but I've just gotten really stuck on this. Are you able to point out where I am going wrong?
Thanks
Erinn
Specifically I'm getting stuck on the co-efficient of QZ(t) which is shown in matrix B0 as QSD. I am getting YW.QSD.
I have not had any trouble getting to equation (2b) on age 28 of the notes;
lnY(t) = {YW.I(t) + lnYMU} + YA.[lnY(t-1) - {YW.I(t-1) + lnYMU}] + YSD.YZ(t)
From there I substitute the equation for I(t) and simplify / rearrange to find the coefficients for the matricies.
lnY(t) = {YW.[QMU+ ... + QSD.QZ(t)] + lnYMU} + ....
Because I(t); which is the source of the QZ(t) term, is multiplied by YW I can't see how it simplifies to QSD.QZ(t) alone?
I realise that this is probably going into detail which is beyond the scope of the course, but I've just gotten really stuck on this. Are you able to point out where I am going wrong?
Thanks
Erinn