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Applied Finance with Eviews : Assignment - Desklib

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Added on  2020-05-28

Applied Finance with Eviews : Assignment - Desklib

   Added on 2020-05-28

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Running Head: FINANCE WITH EVIEWSFinance with EviewsName of the StudentName of the UniversityAuthor note
Applied Finance with Eviews : Assignment - Desklib_1
1FINANCE WITH EVIEWSTable of ContentsAnswer 1..........................................................................................................................................2Answer 2..........................................................................................................................................3Martingale test.............................................................................................................................4Answer 3..........................................................................................................................................6Answer 4........................................................................................................................................16Order of integration for SPREAD.............................................................................................16Co-integration test.....................................................................................................................22Answer 5........................................................................................................................................27Error Correction Model.............................................................................................................27
Applied Finance with Eviews : Assignment - Desklib_2
2FINANCE WITH EVIEWSAnswer 102468101214166065707580859095000510G10The above graph shows the movement of series G10. The variable first moves upward.After reaching peak point it finally constitutes a downward trend with significant fluctuation inthe movement. 02468101214166065707580859095000510TB3MSLike G10, the variable TB3MS shows a fluctuating trend with first going upwards andfinally ends at a significantly low level.
Applied Finance with Eviews : Assignment - Desklib_3
3FINANCE WITH EVIEWSAnswer 2To test whether the variable G10 is martingale or random walk first a regression of thevariable is run only on constant and then a ARCH test of residual is conducted. Regression equation on ConstantDependent Variable: G10Method: Least SquaresDate: 01/06/18 Time: 20:00Sample: 1957Q1 2013Q4Included observations: 228VariableCoefficientStd. Errort-StatisticProb.C6.3217980.18030135.062540.0000R-squared0.000000Mean dependent var6.321798Adjusted R-squared0.000000S.D. dependent var2.722480S.E. of regression2.722480Akaike info criterion4.845340Sum squared resid1682.500Schwarz criterion4.860381Log likelihood-551.3687Hannan-Quinn criter.4.851408Durbin-Watson stat0.030447ARCH test of ResidualsHeteroskedasticity Test: ARCHF-statistic1908.910Prob. F(1,225)0.0000Obs*R-squared203.0651Prob. Chi-Square(1)0.0000Test Equation:Dependent Variable: RESID^2Method: Least SquaresDate: 01/06/18 Time: 20:23Sample (adjusted): 1957Q2 2013Q4Included observations: 227 after adjustmentsVariableCoefficientStd. Errort-StatisticProb.C0.4142950.3013151.3749560.1705RESID^2(-1)0.9462300.02165743.691080.0000R-squared0.894560Mean dependent var7.374374Adjusted R-squared0.894091S.D. dependent var11.84078S.E. of regression3.853420Akaike info criterion5.544571Sum squared resid3340.990Schwarz criterion5.574746Log likelihood-627.3088Hannan-Quinn criter.5.556747
Applied Finance with Eviews : Assignment - Desklib_4
4FINANCE WITH EVIEWSF-statistic1908.910Durbin-Watson stat1.563370Prob(F-statistic)0.000000The p value of the ARCH test statistics is less than the value of significance level. Thisindicates rejection of the null hypothesis stating the absence of auto regressive heteroskadasticy.Henceforth, the hypothesis of whether G10 is martingale is tested. Martingale test In order to test whether the variable G10 is a Martingale two tests have been selected the Chow-Detming test and Kims wild bootstrap test. The former is an asymptotic test.Although, in terms of test statistics both the tests provide same result, but their P value differsignificantly. Unlike, Chow-Denning test Wild Bootstrap test does not rely on asymptotic values.Chow- Denning test Null Hypothesis: G10 is a martingaleDate: 01/05/18 Time: 12:19Sample: 1957Q1 2013Q4Included observations: 227 (after adjustments)Heteroskedasticity robust standard error estimatesUser-specified lags: 2 4 8 16Joint TestsValuedfProbabilityMax |z| (at period 2)*2.6900082270.0283Individual TestsPeriodVar. RatioStd. Errorz-StatisticProbability21.2501170.0929802.6900080.007141.3937420.1711922.3000020.021481.3361630.2709711.2405900.2148161.2908150.4053420.7174540.4731*Probability approximation using studentized maximum modulus withparameter value 4 and infinite degrees of freedomTest Details (Mean = -0.00289280469897)PeriodVarianceVar. RatioObs.10.22666--22720.283351.2501222640.315911.39374224
Applied Finance with Eviews : Assignment - Desklib_5
5FINANCE WITH EVIEWS80.302861.33616220160.292581.29081212Wild Bootstrap test Null Hypothesis: G10 is a martingaleDate: 01/05/18 Time: 12:20Sample: 1957Q1 2013Q4Included observations: 227 (after adjustments)Heteroskedasticity robust standard error estimatesUser-specified lags: 2 4 8 16Test probabilities computed using wild bootstrap: dist=twopoint,reps=1000, rng=kn, seed=1964920415Joint TestsValuedfProbabilityMax |z| (at period 2)2.6900082270.0410Individual TestsPeriodVar. RatioStd. Errorz-StatisticProbability21.2501170.0929802.6900080.002041.3937420.1711922.3000020.023081.3361630.2709711.2405900.2170161.2908150.4053420.7174540.4970Test Details (Mean = -0.00289280469897)PeriodVarianceVar. RatioObs.10.22666--22720.283351.2501222640.315911.3937422480.302861.33616220160.292581.29081212Both the tests have a same value of test statistics with the value being 2.69008. The P value forChow-Denning test is obtained as 0.0283. The same for Wild bootstrap test is 0.0410. Both the pvalues are less than 5% significance level. Therefore, the null hypothesis that G10 is a randomwalk or martingale is rejected. Hence, G10 is not a random walk or martingale. Answer 3The decision regarding order of integration is taken by examining the graph of the variable, itcorrelogram and finally Augmented Dickey Fuller test.
Applied Finance with Eviews : Assignment - Desklib_6
6FINANCE WITH EVIEWSOrder of integration 02468101214166065707580859095000510G10The variable G10 first moves upward. After reaching peak point it finally constitutes adownward trend with significant fluctuation in the movement. CorrelogramCorrelogram provides a test of autocorrelation and partial auto correlation at different lagvalues.
Applied Finance with Eviews : Assignment - Desklib_7
7FINANCE WITH EVIEWSFrom the correlogram, it is seen that there is gradual decline in the autocorrelation series.Moreover, Q statistics for Ljung-Box test produce a statistically significant result. The nullhypothesis that autocorrelations taken up to a particular order are zero. From the result, the non-stationarity of the variable G10 is clearly evidenced.
Applied Finance with Eviews : Assignment - Desklib_8

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