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Answer all questions in this part. 1. (5 points) State and explain the test that you should use to test for the presence of an
Answer all questions in this part. 1. (5 points) State and explain the test that you should use to test for the presence of an ARCH(3) effect. 2. (5 points) State whether the following statement is true or false. Explain your answers clearly. "A white noise series must have the following characteristics: 1) be positively correlated over time, 2) has constant mean and 3) normally distributed." 3. (10 points) Given the following VAR model: y1t=10+111y1,t1+112y1,t2+113y1,t33lagsofy1+121y2,t1+122y2,t2+123y2,t33lagsofy2+e1ty2t=20+3lagsofy1211y1,t1+212y1,t2+213y1,t3+3lagsofy2221y2,t1+222y2,t2+223y2,t3+e2 (i) (5 points) State the hypotheses (with the implied restrictions on the coefficients) for a Granger Causality test that tests whether y1 causes y2. Explain how you can perform this test. (ii) (5 points) State the hypotheses (with the implied restrictions on the coefficients) for a Granger Causality test that tests whether y2 Granger causes y1. Explain how you can perform this test. Answer all questions in this part. 1. (5 points) State and explain the test that you should use to test for the presence of an ARCH(3) effect. 2. (5 points) State whether the following statement is true or false. Explain your answers clearly. "A white noise series must have the following characteristics: 1) be positively correlated over time, 2) has constant mean and 3) normally distributed." 3. (10 points) Given the following VAR model: y1t=10+111y1,t1+112y1,t2+113y1,t33lagsofy1+121y2,t1+122y2,t2+123y2,t33lagsofy2+e1ty2t=20+3lagsofy1211y1,t1+212y1,t2+213y1,t3+3lagsofy2221y2,t1+222y2,t2+223y2,t3+e2 (i) (5 points) State the hypotheses (with the implied restrictions on the coefficients) for a Granger Causality test that tests whether y1 causes y2. Explain how you can perform this test. (ii) (5 points) State the hypotheses (with the implied restrictions on the coefficients) for a Granger Causality test that tests whether y2 Granger causes y1. Explain how you can perform this test
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