a) Explain any TWO (2) disadvantages of Vector Autoregressive (VAR) models compared with univariate time series models or simultaneous equations structural models. (4 marks) b) Often, financial theory will have little to say about an appropriate lag length for a VAR and how long changes in the variables should take to work through the system. In such instances, name the two methods that can be used to arrive at the optimal lag length. (2 marks) c) Suppose that we are interested in investigating whether there is a lead-lag relationship for the return to three exchange rates against the Malaysia Ringgit (MYR) - US Dollars, Singapore Dollar, Great Britain Pounds. i. Write out the system regressions involving the three-currency performance with 2 lags. Let rusd, rsgd' and 'rgbp' denotes the return for US Dollars, Singapore Dollars and Great Britain Pounds, respectively. (4 marks) a) Explain any TWO (2) disadvantages of Vector Autoregressive (VAR) models compared with univariate time series models or simultaneous equations structural models. (4 marks) b) Often, financial theory will have little to say about an appropriate lag length for a VAR and how long changes in the variables should take to work through the system. In such instances, name the two methods that can be used to arrive at the optimal lag length. (2 marks) c) Suppose that we are interested in investigating whether there is a lead-lag relationship for the return to three exchange rates against the Malaysia Ringgit (MYR) - US Dollars, Singapore Dollar, Great Britain Pounds. i. Write out the system regressions involving the three-currency performance with 2 lags. Let rusd, rsgd' and 'rgbp' denotes the return for US Dollars, Singapore Dollars and Great Britain Pounds, respectively. (4 marks)