KTEE 310 FINANCIAL ECONOMETRICS Lecture 6 TIME SERIES ANALYSIS AND APPLICATIONS IN FINANCE 1 Dr TU Thuy Anh Faculty of International Economics ThiN ga nH an g co m ThiNganHang com QUARTERLY GDP 2 0 20[.]
an g co m KTEE 310-FINANCIAL ECONOMETRICS ga nH Lecture 6: TIME SERIES ANALYSIS AND APPLICATIONS IN FINANCE Th iN Dr TU Thuy Anh Faculty of International Economics ThiNganHang.com an g co m QUARTERLY GDP 160000 140000 120000 100000 nH 80000 ga 60000 20000 Th iN 40000 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 ThiNganHang.com an g co m COMPONENTS OF A TIME SERIES Time series: An ordered sequence of values of a variable at equally spaced time intervals Such as: index, inflation, gdp growth rate, etc Components: nH Trend Cycle iN Irregular ga Seasonality The components may make up a TS in two ways: Th additive model: Xt = Tt + St+Ct+It multiplicative model: Xt = Tt * St *Ct*It ThiNganHang.com ASSUMPTIONS FOR TIME SERIES MODEL an g co m C.1 The model is linear in parameters and correctly specified Y = b1 + b2 X + … + bk X k + u nH C.2 The time series for the regressors are weakly persistent ga C.3 There does not exist an exact linear relationship among the regressors C.4 The disturbance term has zero expectation Th iN C.5 The disturbance term is homoscedastic ThiNganHang.com an g co m ASSUMPTIONS FOR TIME SERIES MODEL C.6 The values of the disturbance term have independent distributions ut is distributed independently of ut' for t' ≠ t nH C.7 The disturbance term is distributed independently of the regressors ga ut is distributed independently of Xjt' for all t' (including t) and j iN C.8 The disturbance term has a normal distribution Th Assumption C.6 is rarely an issue with cross-sectional data When observations are generated randomly, there is no reason to suppose that there should be any connection between the value of the disturbance term in one observation and its value in any other ThiNganHang.com ... 120000 100000 nH 80 000 ga 60000 20000 Th iN 40000 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70 73 76 ThiNganHang.com an g co m COMPONENTS OF A TIME SERIES Time series: An ordered... ThiNganHang.com ASSUMPTIONS FOR TIME SERIES MODEL an g co m C.1 The model is linear in parameters and correctly specified Y = b1 + b2 X + … + bk X k + u nH C.2 The time series for the regressors are... expectation Th iN C.5 The disturbance term is homoscedastic ThiNganHang.com an g co m ASSUMPTIONS FOR TIME SERIES MODEL C.6 The values of the disturbance term have independent distributions ut is distributed