Presented by 2013/10/24 Practical Examples using Eviews 2.5 Estimation of an optimal hedge ratio Input Data Descriptive Statistics Genr type rfutures=100*dlog(futures) rspot=100*dlog(spot) Do not forget to Save the workfile. Run Regression If you want to save the summary statistics, you must name them by clicking Name and then choose a name, e.g. Descstats. We can now proceed to estimate the regression. Name returnreg In the same way, we also obtain levelreg Test Coefficients of Regression Example for CAPM Generate New Variables RSANDP=100*DLOG(SANDP) RFORD=100*DLOG(FORD) USTB3M=USTB3M/12 ERSANDP=RSANDP-USTB3M CAPM test APT-style Model In the spirit of APT, the following example will examine regressions that seek to determine whether the monthly returns on Microsoft stock an be explained by reference to unexpected changes in a set of macroeconomic and financial variables. Press Genr dspread = baa_aaa_spread baa_aaa_spread(-1) inflation = 100*dlog(cpi) term = ustb10y ustb3m ermsoft = rmsoft mustb3m (excess return of Microsoft) Stepwise regression Testing for heteroscedasticity If the residuals of the regression have systematically changing variability over the sample, that is a sign of heteroscedasticity. To test for heteroscedasticity using Whites test. Using Whites modified standard error estimates in EViews The heteroscedasticity-consistent s.d. errors are smaller than OLS Durbin-Watson (DW) is a test for first order autocorrelation. Detecting autocorrelation Testing for non-normality The Bera-Jarque normality tests View Residual Tests Histogram Normality Test Multicollinearity Quick/Group Statistics/Correlations In the dialog box that appears: Ersandp dprod dcredit dinflation dmoney dspread rterm RESET tests View Stability tests Ramsey RESET test Stability tests View Stability Tests Chow Breakpoint Test View Stability Tests Recursive Estimates (OLS Only)