Forecasting 2001- VAR Analysis

Forecasting 2001- VAR Analysis - Forecasting Financial...

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Copyright © 2000 – 2006 Investment Analytics Forecasting Financial Markets – VAR Analysis Slide: 1 Forecasting Financial Markets VAR Analysis Copyright © 2000-2006 Investment Analytics
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Copyright © 2000 – 2006 Investment Analytics Forecasting Financial Markets – VAR Analysis Slide: 2 Vector Autoregression ¾ Structural, first order VAR process y t = b 10 – b 12 z t + γ 11 y t -1 + γ 12 z t -1 + ε yt z t = b 20 – b 21 y t + γ 21 y t -1 + γ 22 z t -1 + ε zt { ε yt } and { ε zt } are uncorrelated white noise processes y t and z t have contemporaneous effect on one another
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