why checking correlation in square series?
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Why MATLAB product help (Econometric tools-Getting started-Time series modelling-GARCH models) calculates the correlation in both return series and the square of the return series. What is the reason for investigating the correlation in square series?
Answers (1)
Wayne King
on 6 Dec 2011
0 votes
I'm guessing because correlation in the squared returns indicates correlation in the process variance. And that would indicate the possibility that the process is a good candidate for GARCH modeling.
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on 6 Dec 2011
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