I have been given a basic task designed to assess my knowledge of ARCH/GARCH modelling, which involves fitting the models on 2 lots of time-series index returns.
What are the brief steps I need to follow?
1) Identify if my data is firstly Stationary, then Hetereoskedastic and finally Autocorrelated? (How can I do this?) (ADF test? ARCH LM test?)
2) Fit the model? (what are the steps involved in doing this?) (In a book i've read there is least square approach, and maximum likelihood approach?) (What do I need to look for)
So far I have spent 3-4 days reading, I have a basic understanding of this process but I feel like my knowledge has a lot of gaps and I'm struggling to put it all together.
If someone could outline a simple procedure, what I need to look for etc It'd be of great help!
I'm using the software STATA.