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Long-Term Association in Time Series and Simultaneous Equation Modelling:A Case Study


Affiliations
1 Symbiosis Institute of Business Management, Pune – 412115, Maharashtra, India
 

Simultaneity (Endogeneity) is a normal phenomenon observed in financial data. Modelling of more than one endogenous variable in a single equation using OLS (Optimum Lead Square) is faulty due to the violation of the assumptions of OLS estimator. Therefore, systems of equation (Simultaneous equation modelling) is used instead to OLS. Two stage least square (TSLS) or Generalized method of moments (GMM) is used to estimate systems of equation. This case study highlights the usage of TSLS to estimate systems of equations.


Keywords

Call, Futures, Put, TSLS, Volatility
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Abstract Views: 274

PDF Views: 111




  • Long-Term Association in Time Series and Simultaneous Equation Modelling:A Case Study

Abstract Views: 274  |  PDF Views: 111

Authors

Shailesh Rastogi
Symbiosis Institute of Business Management, Pune – 412115, Maharashtra, India
Chaitaly Athaley
Symbiosis Institute of Business Management, Pune – 412115, Maharashtra, India
Nikita Humane
Symbiosis Institute of Business Management, Pune – 412115, Maharashtra, India

Abstract


Simultaneity (Endogeneity) is a normal phenomenon observed in financial data. Modelling of more than one endogenous variable in a single equation using OLS (Optimum Lead Square) is faulty due to the violation of the assumptions of OLS estimator. Therefore, systems of equation (Simultaneous equation modelling) is used instead to OLS. Two stage least square (TSLS) or Generalized method of moments (GMM) is used to estimate systems of equation. This case study highlights the usage of TSLS to estimate systems of equations.


Keywords


Call, Futures, Put, TSLS, Volatility

References