I have a question regrading EGARCH models. I am partially basing my master research on the methodology followed by Brandt & Jones (2012).
you can find it here: https://faculty.fuqua.duke.edu/~mbrandt/papers/published/regarch.pdf
My problem is that I do not fully understand which variables (dependent and independent) were used to run the mean equation to construct the "REGARCH 1" model and I need to replicate it. As you can see in their paper they set their EGARCH equation to:
ln(ht) − ln(ht−1) = κ(θ − ln ht−1) + φ(XD)+ δ(Rt−1/ht−1)
however this notation deviates from the original EGARCH as developed by Nelson (1991) so I am having a difficult time know how to create this model. I understand how "φ(XD)+ δ(Rt−1/ht−1)" works. However,, the first part is what concerns me "ln(ht) − ln(ht−1) = κ(θ − ln ht−1)". Does somebody know wha these variables are so that I can construct it?
