EViews.com

Hi,
I am working on my thesis about the hedging effectiveness of the european electricity markets, but I have some problems since it's my first time I use eviews. My version is evews5. First of all, I am working on the returns and not on the prices of the electricity. But when I run an OLS estimation the results forthe prices are quite good (in terms of R square), but when I try with the returns, the reslts are not well at all. My estimation include also the multivariate garch?
what do you think I should use: prices or returns?
Thanks
Marta

Results are expected since both your variables are appear to be non-stationary. You can search the forum starting from here.

Results are expected since both your variables are appear to be non-stationary. You can search the forum starting from here.

Thanks for your help. If I have understood well, both prices of spot and futures are non-stationary, but when I consider the returns (as the first difference of logarithm), they appear to be stationary, isn't it right?

Well, I am afraid it will be very difficult to make electricity prices data stationary, since the data will probably be very persistent (e.g. high serial correlation) due to the properties of the market. If I were you, I would consider non-stationary methods and/or multivariate variance modeling techniques. Nevertheless, other members of the forum may have a better solution...

Well, I am afraid it will be very difficult to make electricity prices data stationary, since the data will probably be very persistent (e.g. high serial correlation) due to the properties of the market. If I were you, I would consider non-stationary methods and/or multivariate variance modeling techniques. Nevertheless, other members of the forum may have a better solution...

what non-stationary or multivariate variance models do you suggest?