Hello everyone,
I am new to this forum and I would need some help on a time series regression model with financial variables.
I am regressing Y=S&P500 Health Care index c X=bookmaker odds for the victory of Hillary Clinton x=S&P500 x=USD/EUR
everything is in dlog, and I use the lag of the odds as instrumental variable for the first X.
I was wondering about an instrument for the S&P500.. the lag does not work, so that I thought that MSCI world would be a nice idea, being the S&P500 Health Care components just 4.25% of the MSCI world index; but I fear reverse causality in this case too..could you please help me? is the MSCI world a good instrument?
I am new to this forum and I would need some help on a time series regression model with financial variables.
I am regressing Y=S&P500 Health Care index c X=bookmaker odds for the victory of Hillary Clinton x=S&P500 x=USD/EUR
everything is in dlog, and I use the lag of the odds as instrumental variable for the first X.
I was wondering about an instrument for the S&P500.. the lag does not work, so that I thought that MSCI world would be a nice idea, being the S&P500 Health Care components just 4.25% of the MSCI world index; but I fear reverse causality in this case too..could you please help me? is the MSCI world a good instrument?