# Forecasting Volatility through GARCH and EGARCH models

I am at a final stage of my dissertation but I am a bit confused. I am trying to forecast volatility by using returns through GARCH(1,1) and EGARCH(1,1) models.

I use daily prices of indexes to generate returns, however, I am unsure if I should use either one of the formulas for the return series:

$$r_{t}=100*\frac{\ln(p_{t}}{p{t}-1)}$$ or simply $$r_{t}=\ln(\frac{pt}{p_{t}-1})$$

My professor asked me to keep all my results to 2 d.p. Therefore when I specify my mean equations for the models (using equation 2, for intercepts I get 0.00 (0.00) (error term in parenthesis). However, if I use equation 1, my coefficients for intercepts are nicer since they are obviously multiplied by 100 and take the form of 0.05 (0.01).

The reason why I am wondering is that when I read through the journals on volatility forecasting everyone uses equation 2. Will appreciate any help and advice! - Confused Student