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...ssion)-beta(from regression)*Rm,t)/ There is a paper which does this in a simple manner (see page 12 and 13 of http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1100573 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1100573 ). It is described as follows: Ri=alpha(arch)+beta(arch)*Rm,i+et et=thetat*sqrt(h) h=lamda(0)+lamda(1)*e(t-1)^2 ##e are the residuals of the ols regression Thus my question is now: How can I regress this? Ri=alpha(arch)+beta(arch)*Rm,i+thetat*sqrt(h) ## This seems not to work as it calculates an additional errorterm. Also the parameter theta changes over time. Thus the...