ECM

[kafff]

Hi everybody

want to create spot and futures returns ecm.

I know that in ordinary case it will be like d(s) d(f) u(-1)

But if I'll take f(-1), so it will be d(s) d(f) d(f(-1)) u(-1)?

or I have to estimate lead-lag model?

[EViews Gareth]

I'm afraid I don't follow the question.

[kafff]

Re: ECM

by EViews Gareth on Mon Dec 16, 2013 10:26 am
I'm afraid I don't follow the question.


Ok, sorry. Let me explain. I want to create the Error Correction Model in EViews. I have the spot and futures returns. It's already tested for unit roots and had cointegration. So, ECM can be created. But my problem is that i also need to create ecm for spot and lagged futures f(-1). I'm confused which model need I use - the general ECM or lead-lag model for spot and futures returns? And if general ECM - how i guess, so, i need to use the command like d(s) d(f) d(f(-1)) u(-1)? where d(s) - differenced spot and so on?

[eobumneke]

Hello, What you need to do is to have one over-parametrized ECM model, from which you have to delete the insignificant variables using general to specific method until you arrive at a parsimonious model.