Practical Examples using Eviews

Presented by
2013/10/24

2.5 Estimation of an optimal hedge ratio

This
section shows how to run a bivariate regression usin
g Eviews.
We focus on the relationship between SPOT and FUTURES
:
1. Level regression (long run relationship)
2. Return regression (short run relationship)
.The appropriate hedge ratio will be the slope estimate, , i

n a regression where the dependent variable is the spot r

eturns and the independent variable is the futures return.
.Test whether or not, we can View Coeff. Tests Co
eff. Restrictions. Type C(2)=1.

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 cho

ose 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

Suppose now that we wanted to test the null hyp

othesis that rather than .

Example for CAPM

Generate New Variables

RSANDP=100*DLOG(SANDP)
RFORD=100*DLOG(FORD)
USTB3M=USTB3M/12
ERSANDP=RSANDP-USTB3M

CAPM test
To estimate the CAPM equation, click on Equatio

Type in the equation window

ERFORD C ERSANDP
Or
DLOG(FORD)-USTB3M C DLOG(SANDP)-USTB3M

APT-style Model
In the spirit of APT, the following example will ex

amine regressions that seek to determine wheth

er 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 M

Stepwise regression

Testing for heteroscedasticity

If the residuals of the regression have systematic

ally changing variability over the sample, that is a

sign of heteroscedasticity.
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ERMSOFT Residuals

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To test for heteroscedasticity using Whites test.

Using Whites modified standard error e

stimates in EViews

The heteroscedasticity-consistent s.d. errors are smaller than OLS

Durbin-Watson (DW) is a test for first order
autocorrelation.

Detecting autocorrelation
Breusch-Godfrey test:

Testing for non-normality

The Bera-Jarque normality tests
View Residual Tests Histogram Norm

ality 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 Te

st

View Stability Tests Recursive Estimates

(OLS Only)