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1) Lag Selection
Read t-statistics and p-value; If p<0.05; variable is stationary, otherwise Nonstationary If variable is non-stationary repeat this test with Option trend and intercept, if found stationary the variable is trend stationary. If again found non-stationary, repeat the test with 1st Difference option. If found stationary the variable is difference -stationary or integrated of Order 1
If a series is trend stationary detrend it, or explicitly include trend in your model. If a series is difference stationary, difference it to make it stationary.
Quick- Group Statistics-Granger Causality Test Name Two Series Select Lag Order
Read F-Statistics and p-value If p is less than 0.05, null hypothesis is rejected.
VAR Model
Select the lag based on the criteria of your choice, where the value of the criteria is minimum.
Read chi-square and its p-value. Here the null hypothesis of exclusion is rejected, hence US returns cause Indian returns Here the null hypothesis of exclusion is not rejected; hence Indian returns do not causeUS returns
Impulse Response
Co integration Test
If you are not sure you can get summary of the models (Option 6)
In this case use Panetula Principle and select the first model showing cointegration
If Variables are cointegrated fit a Error correction Model -Open VAR -Select Error Correction Model -Open Cointegration window and select model 1
Results
Error Correction , since both are significant, there is two way adjustment/causality
Short run VAR, You may conduct a Granger causality test for this.
AR(1) model
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Null hypothesis that there is no ARCH effect is strongly rejected, So now estimate ARCH or GARCH model
Test is there further ARCH Effect in residuals using the procedure discussed earlier. Generally you will observe ARCH effect at higher lag orders as volatility is known to be highly persistent. Therefore it is better to estimate a GARCH model than an ARCH model.
Results:
ARCH Coefficient
GARCH Coefficient
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GARCH-X Model
If you want to include some additional variables in volatility equation you can do it by putting the name of the variable in appropriate box. But make sure that the variable should not contain negative values. For example if you have to study the day-of-the week effect in volatility (say Monday effect), make a Monday dummy and put the dummy in the box.