An Excel spreadsheet containing over 900 days of daily data on a number of different exchange rates and stock indices can be downloaded from the author's website. Choose one exchange rate and one stock index. Estimate the value of in the EWMA model that minimizes the value of where is the variance forecast made at the
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10.20 An Excel spreadsheet containing over 900 days of daily data on a number of different exchange rates and stock indices can be downloaded from the author's. Choose one exchange rate and one stock index. Estimate the value of in the EWMA model that minimizes the value of
where is the variance forecast made at the end of day and is the variance calculated from data between day iand day . Use the Solver tool in Excel. To start the EWMA calculations, set the variance forecast at the end of the first day equal to the square of the return on that day.