Posted by: Gajedi March 22, 2010
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Is this really for your dissertation? I just can't believe it, dissertation is usually a part of your Ph.D. program and you are doing something like a multiple regression for your dissertation.
Anyway, here is what you should do:
1. Find some research articles that have provided some insights on your topic. Why did you choose interest rate and inflation for predicting ^DJI and ^FTSE. You can't just say that they are highly correlated and you assume that they can predict the variation in ^DJI or ^FTSE.
2. Check if you have high correlation between interest rate and inflation (remember Fisher's equation). If they are highly correlated then you have a problem of multicollinearity in your equation.
3. Now run equation for multiple linear regression using statistics tools such as eviews, R, etc.
EVIEWS (very expensive):
ls ftse c interest inflation
# Check for t-stat, R squared, etc.
R (freely available)
fit <- lm(y ~ x1 + x2 + x3, data=mydata)
summary(fit) # show results layout(matrix(c(1,2,3,4),2,2))
plot(fit)
Last edited: 22-Mar-10 05:37 PM
Last edited: 22-Mar-10 05:38 PM
Last edited: 22-Mar-10 05:38 PM