Consider the Following Conditional Variance Equation for a GJR Model $\alpha$

question 2

Multiple Choice

Consider the following conditional variance equation for a GJR model. h_t = $\alpha$ ₀ + $\alpha$ ₁+ $\beta$ h_t-1+ $\gamma$ u_t-1²I_t-1 where I_t-1 = 1 if u_t-1 < 0 = 0 otherwise
For there to be evidence of a leverage effect, which one of the following conditions must hold?

• A) \(\alpha\)₀ positive and statistically significant
• B) \(\gamma\) positive and statistically significant
• C) \(\gamma\) statistically significantly greater than \(\alpha\)₀
• D) \(\alpha\)₁+\(\beta\) statistically significantly less than \(\gamma\)

---

Definitions:

Lexical Diversity

The range and variety of words used within a given text or speech, indicating richness and complexity in language usage.

Negotiator's Choice

The decision or strategy a negotiator decides to employ in order to achieve their desired negotiation outcome.

Signal

An act, gesture, or piece of information that conveys a message, intention, or desired action to another party.

Predict

To foretell or estimate the likelihood of a future event or trend based on current knowledge or analysis.