Hi!
Im doing a research paper on the effect of currency changes has on the stock market of four countries. I need some guidance on how to best check if volatility from the FOREX market transmits to the stock market and the other way. I can't find any good guides on how to do this in practice on eViews using both GARCH and EGARCH. Lets say i want to test if Brazilian Real has an effect on the Main index BOVESPA. In other words if there are any volatility transmission from Brazilian Real to BOVESPA.
Should i have BOVESPA as mean equation and then Brazilian Real under the variance regressors?
Thank you.
In principle, it is an easy task. To take your example: You have to define a measure of volatility (V) for Real and BOVESTA (e.g. standard deviation within a certain time period) and estimate a correlation/equation like V(BOVESTA) = lagged V(Real) - independent of the statistical package you use. The main question: Is your model/hypothesis sensible? If you cannot find good reasons. foreget it!
Dear Riduan.
In measuring your volatility, which method are you adopting: standard deviation, ARCH, GARCH or EGARCH.
Then make up your mind about your model specification by going through related journals as a guide.
Wishing you the best.
Kehinde Mary Bello Anton Rainer I've come so far that EGARCH is the best model for my research and for my data set.
Im following the same model specification as in this journal: https://www.econstor.eu/bitstream/10419/176413/1/10.1186_s40854-016-0021-1.pdf
Any tips on how to estimate this model correctly in eViews?
Dear Riduan.
I am presently working on my thesis and also came to a conclusion that EGARCH is the best model for measuring volatility empirically.
Still studying and researching on how to estimate it using Eviews correctly.
Do not hesitate to share information on this aspect with me.
All the best.
Article Volatility Behaviour of the Foreign Exchange Rate and Transm...
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