Introductory Econometrics for Finance - Economics Assignment Help

Assignment Task

Task

Answer all parts of the each question.

• 1. For your series, in Stata, answer the following question:
• i. Examine the descriptive statistics for both lprice and return. What do you conclude about the distributions of lprice and return? Is lprice normally distributed? Is return normally distributed? Explain why/why not?
• ii. Obtain the correlograms, and examine the autocorrelations and partial autocorrelations for both lprice and return. What do you conclude about the behaviour of lprice and return? Are they stationary/non-stationary?
• iii. Are your conclusions about stationary/non-stationary of lprice and return confirmed by appropriate unit root tests?
• 2. Estimate and select an appropriate ARMA (p,q) model for return series. In selecting your preferred model, explain how you use the information provided by: [50 marks]
• i. The estimated coefficients (and their t-statistics);
• ii. Ljung-Box Q-statistics for autocorrelation in the residuals; and
• iii. AIC and SBC information criteria for choosing between alternative models.
• iv. Carry out forecasts (Ex-post Out of sample) of the return series for the last 100 observations using the alternative ARMA (p,q) models and select a model based on your chosen model and comment on your results.
• v. Carry out forecasts (Ex-ante Out of sample) of the return series for the 10 observations (t+1, t+2 …, t+10) using the chosen model and comment on your results

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