R2 are so close to 0 because they are sq. ln returns of 15 min. on EUR/USD. I'm trying to measure impact of news on volatility (somehow quantative, like news increases volatitility 20% etc). As I don't have any background in stats and econometric, it seems somehow too hard for me for now. As I understood from your last post, I should consider building mean equation with news included? Where should I i start when building model witch fits the data best?
Can somebody recommend good book about time series for newbie?
Perhaps the confusion is that you have two separate equation.
Variable Coefficient Std. Error z-Statistic Prob.
C 5.98E-06 2.70E-06 2.216094 0.0267
AR(2) -0.027492 0.011095 -2.477805 0.0132
C 2.00E-08 5.84E-10 34.26444 0.0000
RESID(-1)^2 0.227158 0.006963 32.62504 0.0000
GARCH(-1) 0.585539 0.007078 82.73102 0.0000
NEWS 3.51E-07 7.78E-09 45.08955 0.0000
R-squared -0.002031 Mean dependent var 6.11E-07
You are doing a fine job of explaining volatility, and the NEWS variable is significant there. It's the return equation that has no explanatory power. If it's volatility you"re after, the latter is not a problem.