**IC205 Introductory Econometrics for Finance. Group Project 2019**

**IC205 Introductory Econometrics for Finance. Group Project 2019**

Econometrics for Finance代写 The Group Project requires you to demonstrate: knowledge of using Eviews to import and manipulate data, the ability to specify

**Information Econometrics for Finance代写**

**Information Econometrics for Finance代写**

The Group Project requires you to demonstrate: knowledge of using Eviews to import and manipulate data, the ability to specify and estimate appropriate models; understanding of regression analysis and hypothesis testing and the ability to implement these in Eviews and interpret the output; the ability to test for unit roots, and knowledge of the consequences of unit-root non-stationarity for economic modelling; and time-series modelling.

This knowledge will be acquired by attending the lectures, the Eviews classes and the problem set classes. The material on time-series modelling and testing for unit roots, will be covered in the later weeks of the term. Hence the deadline for handing in work will be after the Easter vacation (see below).Econometrics for Finance代写

You need to arrange yourselves into groups of 5 or 6 people (groups smaller than 5 or larger than 6 are not permitted). All members of a given group will receive the same mark, and it is up to you to determine the allocation of work within the group and to ensure that all group members make a valid contribution. All members of a group should be happy with the whole submission, as you assume joint responsibility.

#### When you have formed a group of 5 or 6, you should all self-enrol into the same Group in Blackboard.Econometrics for Finance代写

- Each student should login to their Blackboard account. Choose IC205, Introductory Econometricsfor Finance.
- Select Groups, and enrol yourself in the same numbered group as the other members of your Group. (The first member of your team should choose the next available numbered group when they logon, and all members should then self-enrol into that group)Econometrics for Finance代写

Please ensure you have set up your groups, and all group members have enrolled, by February 18th.

Your group should prepare a report using your knowledge from the course. The word limit for the written part of the assignment is 2,500 words (excluding tables and references. Output from Eviews, including charts or tables, can be pasted into the report.

The textbook by Chris Brooks, Introductory Econometrics for Finance (3rd edition), section 4.6 page 145 onwards provides an illustration of whether the monthly returns on a particular stock can be explained by the unexpected changes in a set of macroeconomic and financial variables, where the stock is Microsoft. You are required to perform a similar analysis for two stocks of your choosing, so you are advised to read the relevant part of Brooks carefully. You may use the same set of explanatory variables as in Brooks (available on Blackboard as macro.xls), but you need to download two stock price series for the same period (monthly, March 1986 to April 2013), and use those series * instead of *the Microsoft stock price variable used by Brooks. If you wish to use the US macro variables in macro.xls, then make sure you choose US stocks.Econometrics for Finance代写

##### The deadline for submission of the assignment is **2pm Wednesday 1****st ****May 2019. **

**2pm Wednesday 1**

**st**

**May 2019.**

** An electronic submission on Blackboard must be made before this date and time. One person from each group should upload an electronic version to the Blackboard site. **Extensions to the deadline will only be given in very exceptional circumstances. Any such requests for an extension must be agreed by the ICMA Centre’s Senior Tutor, Dr Gita Persand, and must be accompanied by a completed extenuating circumstances form available from

__http://www.reading.ac.uk/internal/exams/student/exa-circumstances.aspx__. Late submissions will be penalised according to University policy.Econometrics for Finance代写

Once the project is completed, as part of the submission process for the assignment, one person from each group is required to upload an electronic version of it to the Blackboard site. Reports must be submitted in one of the following formats: Word or PDF files. Follow the procedure below to submit your project,

##### which must be submitted as one single file.

- Goto http://www.bb.reading.ac.uk
- Enter the login and password and click
- Click on Introductory Econometrics for Finance(2018/19)
- From the left-hand menu, go to
- Click on View/ Complete under IEFAssignment
- You will see a box on the screen, which should be populatedwith: Your first

Last name (Family name).Econometrics for Finance代写

You will need to add the Submission Title.

Please note that your title must include your full name followed by IEF Project, e.g. John Smith: IEF Project

- Click the browse button and select the file for your assignment on your computer(Remember that this must be one file only).
- Click the submit

The beginning of your assignment work will be shown on screen. Please check at this stage that you are submitting the correct file.

Note: All the formatting of your assignment is temporarily removed by Turn-It-In from the version shown on screen, and any Greek symbols and diagrams will disappear. Your assignment appears as a simple text file. Click the yes, submit button.Econometrics for Finance代写

- You will see on the screen a submission confirmation. You will also receive an e-mailfrom Turn-It-In UK confirming the receipt of your submission. Please keep this safe. This e-mail is also your proof of
- Log off. Click log out at the top of the

**Assignment Econometrics for Finance代写**

**Assignment Econometrics for Finance代写**

**Answer all parts of the following question. Marks allocated to each part in square brackets.**

a)Run regressions of the excess returns on your two chosen stocks on the macro and financial variables as in Brooks p. 145 –. That is, you should run two separate regressions, one for each stock. You should use the same transformations of the explanatory variables as in Brooks. Carefully interpret the estimated coefficients on the explanatory variables in the two models. Which ones are individually statistically significant, and do they have theexpected signs? [10]

b)In each regression, test whether the coefficient on ‘ersandp’ is statistically different from 1. [‘ersandp’ is the excess return for the S&P index]. Test whether you can jointly restrict the coefficients on the macro- variables (taken to be industrial production and inflation)to zero. [10]Econometrics for Finance代写

#### c)Undertake careful diagnostic checking of the two equations.

This should include a consideration of whether the assumed linear functional form is correct; whether the error terms are normally distributed; and whether there is evidence that the error terms are serially correlated. Discuss your findings.[10]

d)By examining the estimated error terms, or any other means, are there periods when the models for the two stocks perform particularly badly? How good is the model – what proportion of the variation in the dependent variable is explained (that is, what isthe R-squared?). [10]Econometrics for Finance代写

e)Perform a Chow test for a structural break around the midpoint of the sample for each stock. Calculate a predictive failure test for the last six observations. What do these test outcomes indicate about the model youhave estimated? [10]

##### f)Using a suitable dummy variable which you have generated yourself,

test whether the response of the dependent variable to the industrial production variable depends on whether the US economy is in contraction or expansion. (The dummy variable can be constructed from the information on the US Business Cycle available at__http://www.nber.org/cycles.html__ ). Carry out this test for both [10]

g)Test whether the following variables have unit roots: the log of the consumer price index, the log of the two stock prices, and the log ofindustrial production. [10]

h)Are the two stock price indices cointegrated (use the logs of the indices)? Explain as fully as you can the implicationsof variables having unit roots for standard / classical econometric testing and modelling.[15]Econometrics for Finance代写

i)Take the difference of the log of one of your two stock price series. Interpret this new variable. What do you find if you attempt to fit an ARMA model to the series? Next, fit an ARMA model to the (log) ofthe industrial production series, after first differencing the series, if appropriate. Is the ARMA class of models useful for both the stock price variable and the industrial production variable?[15]

**Assessment Criteria Econometrics for Finance代写**

**Assessment Criteria Econometrics for Finance代写**

Your work will be assessed in terms of how well you have carried out the various parts of the Assignment, in terms of e.g., appropriate construction of variables to use in the regression models; correctness, clarity, completeness and relevance of your interpretations and commentaries. The assignment is designed to test your understanding, and ability to interpret the computer-generated output in terms of the concepts and ideas discussed in the lectures and classes.

You will not be assessed in terms of how well your model happens to fit the data, or whether you find particular variables are significant.

The marks assigned to each part of the Assignment are given in square brackets at the end of each part.

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