Introductory Econometrics for Finance Chris Brooks ch5文档.pptVIP

* * ‘Introductory Econometrics for Finance’ ? Chris Brooks 2002 * ACF and PACF for an MA(2) Model: yt = 0.5ut-1 - 0.25ut-2 + ut ‘Introductory Econometrics for Finance’ ? Chris Brooks 2002 * ACF and PACF for a slowly decaying AR(1) Model: yt = 0.9yt-1 + ut ‘Introductory Econometrics for Finance’ ? Chris Brooks 2002 * ACF and PACF for a more rapidly decaying AR(1) Model: yt = 0.5yt-1 + ut ‘Introductory Econometrics for Finance’ ? Chris Brooks 2002 * ACF and PACF for a more rapidly decaying AR(1) Model with Negative Coefficient: yt = -0.5yt-1 + ut ‘Introductory Econometrics for Finance’ ? Chris Brooks 2002 * ACF and PACF for a Non-stationary Model (i.e. a unit coefficient): yt = yt-1 + ut ‘Introductory Econometrics for Finance’ ? Chris Brooks 2002 * ACF and PACF for an ARMA(1,1): yt = 0.5yt-1 + 0.5ut-1 + ut ‘Introductory Econometrics for Finance’ ? Chris Brooks 2002 * Box and Jenkins (1970) were the first to approach the task of estimating an ARMA model in a systematic manner. There are 3 steps to their approach: 1. Identification 2. Estimation 3. Model diagnostic checking ? Step 1: - Involves determining the order of the model. - Use of graphical procedures - A better procedure is now available ? Building ARMA Models - The Box Jenkins Approach ‘Introductory Econometrics for Finance’ ? Chris Brooks 2002 * Step 2: - Estimation of the parameters - Can be done using least squares or maximum likelihood depending on the model. Step 3: - Model checking Box and Jenkins suggest 2 methods: - deliberate overfitting - residual diagnostics Building ARMA Models - The Box Jenkins Approach (cont’d) ‘Introductory Econometrics for Finance’ ? Chris Brooks 2002 * Identification would typically not be done using acf’s. We want to form a parsimonious model. Reasons: - variance of estimators is inversely proportional to the number of degrees of freedom. - models which are profligate might be inclined to fit to data specific features ? This gi