GARCH

Types of data –

 TIME SERIES – TIME INTERVAL SHOULD BE SAME FOR THE

OBSERVATIONS. ALL MODELS USED.
 PANEL – pooled OLS, random effect
 CROSS SECTION – WE USE REGRESSION ONLY

DATA GENERATING PROCESS

 RANDOM WALK – NON STATIONARY DATA. NONE OPTION IN EVIEWS to

check stationality.
 STOCHASTIC TREND – – NON STATIONARY DATA. INTERCEPT OPTION IN
EVIEWS
 T+s+d = TREND + STOCHASTIC +DETERMINISTIC. I+ TREND OPTION IN
EVIEWS. Deterministic should be convex/concave

1. DRAG FILE IN EVIEWS SOFTWARE

2. CHECK NORMALITY
Double click on close price
Go to view
Descriptive statistics and tests
Histograms and stats
H0 – normal
H1 – not normal
Check jarque bera test. If less than 5 % , accept H1.

Go to view
Click on graphs
Lines and symbols

3. CHECK STATIONARY/NON-STATIONARY

GO TO view

Unit root test

H0 data is not stationary

H1 – data is stationary

Augmented dickrey fuller test (ADF)

Choose text equation.

Leave lags.

If null hypothesis has a unit root – non stationary

If prob is greater than 0.05, accept H0.