Governance and Sustainability by Unknown

Author:Unknown
Language: eng
Format: epub
ISBN: 9789811563706
Publisher: Springer Singapore

7.3.6 ARMA Model Estimation

The characteristics of the series of stock market returns justify the proper use of a non-linear ARMA model.

To identify the order p and q of an ARMA process, we use the correlogram of the autocorrelation function and the partial autocorrelation function.

The correlogram of the autocorrelation function makes it possible to identify a model MA (q), whereas the correlogram of the partial autocorrelation function enables us to determine an AR model (p). According to the correlograms, we retain the following models (Table 7.2).Table 7.2Descriptive statistics on series of stock market returns

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