Time Series Analysis with EViews

K N Badhani
 Correlogram

Quick Series Statistics- Correlogram.

Put the series name.

Put number of lags
Select Level

Press OK
Test the joint significance of
autocorrelation up to the given lag-
order.
Correlogram of a Non-Stationary /Unit-Root Process
 Unit Root Test

Open: Quick Series Stati stics-Unit Root Test.

-Enter the variable

 First select only Name of the test
intercept
First select at
Level
1) Lag
Selection
 Read t-statistics and p-value;

If p<0.05; variable is stationary, otherwise Non-

stationary

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.

 Granger Causality Test

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
unrestricted
VAR Enter at least
two variables

Select lag
order
Lag Length Selection:
Go to

View-lag structure-lag length criteria

Select the lag based on the
criteria of your choice, where
the value of the criteria is
minimum.
Granger Causality (Block Exogenity Test)

View-lag structure Granger causality/Block Exogenity Test

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

View Impulse Response

Define the impulse. Cholesky
decomposition is most
frequently used.

If Cholesky decomposition is
used the sequence of the
variable becomes important
Co integration Test
Here select the appropriate model.
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
Results of the first model

Ho r=0 rejected

H0 r=1 not rejected

Variables are cointegrated

If Variables are cointegrated fit a Error correction Model

-Open VAR

-Select Error Correction Model

-Open Cointegration window and select model 1

Results

Cointegration equation
normalized to LOGSPOT

Error Correction , since both

are significant, there is two
way adjustment/causality

Short run VAR,

You may conduct a Granger

causality test for this.
Granger Causality Test

Both the hypotheses are

rejected, there is two way
short-run causality
 ARCH-GARCH Models

Testing ARCH Effect:

We will estimate AR(1) Model of stock market returns in India (ind) and then we will test the presence of
ARCH effect:

Open Quick - Estimate Equation

AR(1) model

Method of
Estimation
OLS/ARMA

Get results
Go to:

View- Residual Test - ARCH-ML test

Select lag-order (say 1)
Null hypothesis that
there is no ARCH effect
is strongly rejected, So
now estimate ARCH or
GARCH model
Estimating ARCH Model

Open-Quick-Estimate Equation

The following dialog box will appear

Enter the variable

also the mean
equation

Select ARCH from

drop-down box
The following dialog Box will appear

If you have to
estimate
ARCH(1)
model make it
zero

If you have to
estimate ARCH (p)
p=1,2,; change
this accordingly
 This is the ARCH (1) coefficient

And this is statistically significant.

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.
 Estimation of GARCH (1, 1)

Model

Results:

ARCH Coefficient

GARCH Coefficient
Test for Residual ARCH effect (selected lag order 10):

Now ARCH
effect is not
there in the
residuals

If you have to get the estimated conditional volatility graphically; go to

View Conditional SD Graph

You obtain the following graph.

To save the graph in word file go to

Edit - copy
To obtain the conditional Volatility as a variable

Go to

Proc Make a GARCH Variance Series

Estimating TRARCH Model

Change this to 1

Estimating EGARCH Model:

Change the
model to EARCH
using drop down
Box
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.

Put additional
variable here.