Econometrics

Answer questions of Econometrics should be done only the second questions! 2. In EViews open ‘log returns 9 series.wf1’ file that contains 1471 daily observations of log-returns for the foreign exchange, equity and bond markets in Japan, Europe and the US. Use 3 foreign exchange series to answer the following questions. (a) Estimate GARCH, EGARCH and GJR models for each of the series and interpret coefficients in these models. Do you agree that the coefficients on the asymmetry terms are consistent to what would have been expected? Why? [20 marks] (b) Compare volatility estimates obtained from part (a) with absolute returns in each of the markets. Is it true that absolute returns have similar patterns to volatility estimates across time? [20 marks] (c) Plot News Impact Curves (NICs) for the European foreign exchange returns using coefficients implied from GARCH and EGARCH model estimates in part (a). Explain why these NICs are different.