Suppose That a Researcher Estimates a GARCH(1,1) Model and Obtains

Multiple Choice

Suppose that a researcher estimates a GARCH(1,1) model and obtains a log likelihood function (LLF) value of 71.22. He is interested in testing whether an ARCH(1) model is a better model at describing volatility. If he estimates a model which imposes the necessary restrictions and obtains an LLF value of 68.21, what would be the conclusion of his likelihood ratio test (assuming a 5% significance level) ?

A) Statistical evidence suggesting that ARCH(1) is better than GARCH(1,1)
B) Statistical evidence suggesting that ARCH(1) is not better than GARCH(1,1)
C) Statistical evidence suggesting that GARCH(1,1) is better than ARCH(1)
D) We cannot say because we would need to know the number of observations