1- Can I run my VAR on first differenced variables or returns, rather than level variables, or is that totally wrong?
2-I run a second VAR model on level variables, do I have to take their logs?
Serving the Quantitative Finance Community
Re: Can I run my VAR model on differenced variables?
Assuming that you are talking about vector autoregression, this discussion may be of use: VAR in levels or differences. The answer to your second question depends on how you think the volatility of your processes are best specified: constant in absolute terms or constant as a fraction of the level (as we used to say in interest rate modeling in the early 90's: are rates normal or lognormal?).
Re: Can I run my VAR model on differenced variables?
Thank you dear bearish for the link, helps 