Professional Writers
We assemble our team by selectively choosing highly skilled writers, each boasting specialized knowledge in specific subject areas and a robust background in academic writing
Order For Similar Custom Papers & Assignment Help Services
Fill the order form details - writing instructions guides, and get your paper done.
Posted: September 10th, 2021
Question set 1. Consider the Capital Asset Pricing Model that relates the excess return of a security to the market portfolio. The relevant data set (CAPM.xls) contains prices of different US stocks, S&P 500 index and the series of the US Treasury bills
Question set
1. Consider the Capital Asset Pricing Model that relates the excess return of a security to the market portfolio. The relevant data set (CAPM.xls) contains prices of different US stocks, S&P 500 index and the series of the US Treasury bills.
a) Estimate CAPM betas for each of the stock. [10 marks]
b) Examine the sizes and signs of the parameters in the regressions. Do these make sense? [10 marks]
c) Explain which of the stocks would you classify as defensive stocks and which as aggressive? [10 marks]
d) Do you agree that the CAPM provides some reasonable explanation of the variability of the returns to each of the stock? [10 marks]
e) Check if the CAMP model for FORD suffers from heteroscedasticity. Use a formal test to check that. [10 marks]
f) Can you use the standard errors in this regression if residuals are heteroscedastic? [10 marks]
g) For the model estimated in part e) formally test if the residuals are correlated? [10 marks]
h) How would you solve the problem of autocorrelation? [10 marks]
i) Suppose you want to regress GE log returns on FORD and S&P log returns. Would you expect to have multi-collinearity? Check it. [20 marks]
2. Select two of the stock series from the CAPM.xls, construct a set of continuously compounded returns, and perform a time series analysis of these returns using EViews which includes
a) An examination of the ACFs and PACFs. [25 marks]
b) An estimation of the information criteria for each ARMA model order from (0,0) to (2,2). [25 marks]
c) An estimation of the model that you feel more appropriate given the results from the previous two parts. [25 marks]
d) The construction of a forecasting framework to compare the forecasting accuracy of
i) Your chosen ARMA model [5 marks]
ii) An arbitrary ARMA(1,1) [10 marks]
iii) A random walk with drift in the log price levels (hint: this is equivalent to an ARMA(0,0) – a simple model with a constant). [10 marks]
[Total: 200 marks]
Why choose us
You Want Quality and That’s What We Deliver
Discounted Prices
Our service is committed to delivering the finest writers at the most competitive rates, ensuring that affordability is balanced with uncompromising quality. Our pricing strategy is designed to be both fair and reasonable, standing out favorably against other writing services in the market.
AI & Plagiarism-Free
Rest assured, you'll never receive a product tainted by plagiarism or AI-generated content. Each paper is research-written by human writers, followed by a rigorous scanning process of the final draft before it's delivered to you, ensuring the content is entirely original and maintaining our unwavering commitment to providing plagiarism-free work.
How it works
When you decide to place an order with Nurscola, here is what happens: