\u2013 This is an individual assignment. It should reflect your individual effort<\/p>\n
\u2013 The assignment should be typed, with the main tables, charts and results presented<\/p>\n
throughout the assignment to highlight your responses to the questions<\/p>\n
\u2013 There should be no appendices (appendices will not be marked) <\/strong><\/p>\n \u2013 Marks will be awarded for neatness, conciseness and clarity of answers<\/p>\n \u2013 Where answers call for explanation, a simple reporting of numerically correct results<\/p>\n will yield few (if any) marks<\/p>\n \u2013 When conducting hypothesis tests, outline all steps in your answer<\/p>\n \u2013 Maximum number of pages allowed: 10<\/strong> (additional<\/p>\n pages will not be marked)<\/p>\n \u2013 Pages should be numbered<\/p>\n \u2013 Be as concise as you can, while clearly addressing each question<\/p>\n \u2013 Total marks: 30<\/strong> <\/strong><\/p>\n <\/p>\n <\/p>\n Submission instructions <\/strong><\/p>\n \u2013 You are required to submit the assignment in both print and electronic copies<\/p>\n \u2013 Electronic submission is via a submission link on<\/p>\n iLearn<\/p>\n \u2013 Print copy (with a signed assignment coversheet) must be submitted at BESS (E4B) \u2013<\/p>\n ensure you know your tutor\u2019s name, as there will be separate submission boxes for<\/p>\n each tutor<\/p>\n \u2013 A link to the FBE cover sheet is provided under the \u201cAssignment\u201d heading on iLearn<\/p>\n Fill in<\/p>\n the details of the cover sheet and staple it to the front of your assignment<\/p>\n <\/p>\n Part 1<\/p>\n Part 1 \u2013 Total number of marks: 15<\/p>\n The Eviews workfile \u201cPart1_Assignment_Workfile.wf1\u201d located under \u201cAssignment\u201d heading<\/p>\n on iLearn contains four series for the period June 1972 \u2013 February 2016 (525 observations).<\/p>\n The following variables are included:<\/p>\n <\/p>\n <\/p>\n cvs<\/em><\/p>\n (CVS Health which is a U.S. pharmaceutical company)<\/p>\n _mkt rf<\/em><\/p>\n Market Risk Premium<\/p>\n hml<\/em><\/p>\n High minus Low<\/p>\n smb<\/em><\/p>\n Small minus Big<\/p>\n rf<\/em><\/p>\n (the U.S. risk free rate)<\/p>\n Answer the following questions based on this dataset:<\/p>\n <\/p>\n and French 1993 paper \u2013 its on iLearn). Briefly describe major company characteristics<\/p>\n of CVS Health. (2 marks)<\/p>\n <\/p>\n log returns (in percent, e.g. 3.25%) and name them _.r cvs <\/em> Calculate the excess<\/p>\n return on<\/p>\n cvs<\/em><\/p>\n stock as<\/p>\n _r cvs rf<\/em>\u2013<\/p>\n and name it _.er cvs <\/em> Consider the following<\/p>\n model:<\/p>\n er cvs mkt rf hml smb<\/em>b bbbe=+ + + +<\/p>\n What signs (positive or negative) would you expect to estimate for each of the factors?<\/p>\n __<\/p>\n Why? (3 marks)<\/p>\n <\/p>\n 01 2 3<\/p>\n ttttt<\/em><\/p>\n coefficients. Which parameters are statistically significant at the 5% level? Are the<\/p>\n estimated parameters of the same<\/p>\n sign as you expected in B? (4 marks)<\/p>\n <\/p>\n <\/p>\n lags of residuals), heteroskedasticity (no cross product), non-normality,<\/p>\n misspecification of functional<\/p>\n form (only quadratic term). Comment on your results<\/p>\n and suggest remedies to any problems you may detect. (You are NOT required to<\/p>\n carry out the remedy to any problem you may detect. If you see a problem, state what<\/p>\n it is and simply describe what could be done). (3 marks)<\/p>\n <\/p>\n Part 2<\/p>\n Part 2 \u2013 Total number of marks: 15<\/p>\n The Eviews workfile \u201cPart2_Assignment_Workfile.wf1\u201d located under \u201cAssignment\u201d heading<\/p>\n on iLearn contains daily<\/em> adjusted closing price <\/em>for Qantas from 01 Jan 2007 to 12 April 2016,<\/p>\n which is 2,414 daily observations. It is designated \u201cQan\u201d in the workfile.<\/p>\n <\/strong><\/p>\n share price, and comment on its salient features. Conduct<\/p>\n an ADF unit-root test on the price series. Be careful to properly state the null and<\/p>\n alternative hypothesis for the test. Comment on your findings.<\/p>\n (2 marks)<\/p>\n <\/p>\n for Qantas.<\/p>\n Name this variable<\/p>\n _.r qan<\/em><\/p>\n Present a graph of the return series along with summary<\/p>\n statistics, and comment. Conduct a KPSS unit-root test on the returns for Qantas. Be<\/p>\n careful to properly state the null and alternative hypothesis for the test. Comment on<\/p>\n your findings.<\/p>\n (2 marks)<\/p>\n <\/p>\n for Qantas returns (include 5 lags). On the basis of<\/p>\n these results, you decide to estimate three models for Qantas returns. They are:<\/p>\n rqan <\/em>b e=+ (1)<\/p>\n _<\/p>\n _<\/p>\n 1<\/p>\n tt<\/em><\/p>\n r qan <\/em>b be e<\/p>\n =+ + (2)<\/p>\n \u2013<\/p>\n 121<\/p>\n ttt<\/em><\/p>\n r qan r qan<\/em>b be<\/p>\n =+ + (3)<\/p>\n Which model do you think is the best from among these three?<\/p>\n (2 marks)<\/p>\n <\/p>\n __<\/p>\n \u2013<\/p>\n 12 1<\/p>\n ttt<\/em><\/p>\n they differ? Report the fitted<\/p>\n equations, comment on the output, including a careful<\/p>\n interpretation of the parameters in the volatility equation, and compare across the<\/p>\n three specifications. Provide graphs of the estimated conditional variances and<\/p>\n comment on them. Overall, which one of the three specifications do you prefer?<\/p>\n (9 marks)<\/p>\n References <\/strong><\/p>\n <\/strong><\/p>\n Fama, E. F. and<\/p>\n French, K. R. (1993). \u201cCommon risk factors in the returns on stocks<\/p>\n and bonds\u201d. Journal of Financial Economics<\/em> 33(3), 3-56.<\/p>\n","protected":false},"excerpt":{"rendered":" \u2013 This is an individual assignment. It should reflect your individual effort \u2013 The assignment should be typed, with the main tables, charts and results presented throughout the assignment to highlight your responses to the questions \u2013 There should be no appendices (appendices will not be marked) \u2013 Marks will be awarded for neatness, conciseness and clarity of answers \u2013 Where answers call for explanation, a simple reporting of numerically correct results will yield few (if any) marks \u2013 When conducting hypothesis tests, outline all steps in your answer \u2013 Maximum number of pages allowed: 10 (additional pages will not be marked) \u2013 Pages should be numbered \u2013 Be as concise as you can, while clearly addressing each question \u2013 Total marks: 30 Submission instructions \u2013 Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-182843","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/182843","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=182843"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/182843\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=182843"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=182843"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=182843"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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