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Autoregressive Moving Average Models 177 likelihood function are obtained recursively from the model, starting with ε 1 = y 1 − ...

178 The Basics of financial economeTrics Autoregressive Moving Average Models Because in practical applications higher-order mod ...

Autoregressive Moving Average Models 179 The benefit of ARMA models is a higher-order AR or MA model may have a parsimonious ARM ...

Figure 9.1 CRSP Value-Weighted Weekly Index Returns, January 1998 through October 2012 1998 2000 2002 2004 2006 2008 2010 2012 0 ...

Autoregressive Moving Average Models 181 current weekly return. The moving average is positively related to this week’s returns ...

table 9.4 Autoregressive Moving Average Models, Akaike Information Criterion (AIC) for the Weekly Sample Returns of CRSP Value- ...

Autoregressive Moving Average Models 183 of 1998 through December 2012 (783 observations) used in our illustration are obtained ...

Figure 9.2 S&P 500 Weekly Index Returns, January 1998 through December 2012 1998 2000 2002 2004 2006 2008 2010 2012 0.15 0.1 ...

table 9.6 Autoregressive Moving Average Models, Akaike Information Criterion (AIC) for the Weekly Sample Returns of S&P 500 ...

186 The Basics of financial economeTrics table 9.7 Autoregressive Moving Average Model, Weekly Sample Returns of S&P 500 Ind ...

187 Figure 9.3 S&P 500 Weekly Forecasts with Actual Returns S&P 500 is the realized weekly returns. The FORECAST_AR1 rep ...

188 The Basics of financial economeTrics 500 returns fluctuated considerably more than the prediction made by the models. Howeve ...

Autoregressive Moving Average Models 189 could be some Japanese daily stock index returns. These returns are not only affected b ...

190 The Basics of financial economeTrics ■ (^) The appropriate number of lags can be selected either by using a partial autocorr ...

191 Chapter 10 Cointegration a fter reading this chapter you will understand: ■ (^) The concept of cointegration. ■ (^) The conc ...

192 The Basics of financial economeTrics regression equation. The issue becomes more complex when the trend is sto- chastic. As ...

Cointegration 193 relationship is reinforced with a very high R^2 value. However estimating the same regression over a different ...

194 The Basics of financial economeTrics our focus, we note that cointegration analysis has been used for mainly two types of pr ...

Cointegration 195 The simplest example of a nonstationary variable is a random walk. A variable is a random walk if Xt = LXt + e ...

196 The Basics of financial economeTrics equilibrium in cointegration analysis means that if variables are apart, they show a gr ...