Project Methodologies

PROJECT METHODOLOGIES

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
(A) Evaluation of stationary factor..................................................................................................1
B.......................................................................................................................................................6
(1) Mean variance analysis..........................................................................................................6
(2) Covariance matrix.................................................................................................................7
3 Efficient frontier.......................................................................................................................7
........................................................................................................................................................10
(C) GARCH results........................................................................................................................11
........................................................................................................................................................13
(D) ARMA.....................................................................................................................................20
CONCLUSION..............................................................................................................................22
REFERENCE................................................................................................................................................24
Table 1ASTRAZENECA PACF.....................................................................................................1
Table 2BAE SYSTEMS PACF.......................................................................................................2
Table 3COCA COLA HOLDING AG PACF.................................................................................3
Table 4BRITISH AMERICAN TOBAE SYSTEMSCO PLC PACF.............................................4
Table 5Covariance matrix................................................................................................................7
Table 6Descriptive statistics............................................................................................................7
Table 7Covariance matrix................................................................................................................8
Table 8Target return and average return.........................................................................................9
Table 9Input for efficient frontier....................................................................................................9
Table 10Efficient frontier..............................................................................................................10
Table 15GARCH for ASTRAZENECA 10 months......................................................................11
Table 11ASTRAZENECA regression...........................................................................................11
Table 16Statistics for ASTRAZENECA 10 months.....................................................................12
Table 17GARCH for 2 months......................................................................................................13
Table 13ASTRAZENECA 2 months regression...........................................................................13

Table 18ASTRAZENECA for two months...................................................................................15
Table 19BAE SYSTEMS 10 months............................................................................................16
Table 12BAE SYSTEMSL Regression.........................................................................................16
Table 20Statistics for BAE SYSTEMS 10 months.......................................................................17
Table 21BAE SYSTEMS 2 months..............................................................................................18
Table 14BAE SYSTEMS 2 months regression.............................................................................18
Table 22Statistics for BAE SYSTEMS 2 months.........................................................................20
Table 23ASTRAZENECA regression...........................................................................................20
Table 24BAE SYSTEMS Regression...........................................................................................21

INTRODUCTION
Investment is the one of the sources of income for corporates and small investors. Risk on equity is high and return is also high. It
became always difficult for the investor to make prudent decisions. Hence, efficient frontier approach must be used by the investors in
order to make prudent investment decisions. In the current study, GARCH and ARCH models are prepared and along with them
efficient frontier are also prepared. ACF and PACF calculation is also done and in this way entire research work is carried out.
(A) Evaluation of stationary factor
Table 1ASTRAZENECA PACF
Regression Statistics
Multiple R 0.024623
R Square 0.000606
Adjusted R
Square -0.01158
Standard Error 0.014324
Observations 250
ANOVA
df SS MS F
Significance
F
Regression 3 3.06E-05 1.02E- 0.04974 0.985299
1

05 4
Residual 246 0.050471
0.00020
5
Total 249 0.050502
Coefficient
s
Standard
Error t Stat P-value Lower 95%
Upper
95%
Lower
95.0%
Upper
95.0%
Intercept 0.000596 0.000909
0.65583
8
0.51254
1 -0.00119 0.002386 -0.00119 0.002386
Lag 2 0.023965 0.063764 0.37583
0.70736
7 -0.10163 0.149559 -0.10163 0.149559
Lag 3 -0.00472 0.063757 -0.0741
0.94099
3 -0.1303 0.120855 -0.1303 0.120855
Lag 4 -0.0036 0.062989 -0.05708
0.95453
1 -0.12766 0.120471 -0.12766 0.120471
Table 2BAE SYSTEMS PACF
Regression Statistics
Multiple R 0.115003739
R Square 0.01322586
Adjusted R
Square 0.001192029
2

Standard Error 0.014060995
Observations 250
ANOVA
df SS MS F
Significance
F
Regression 3 0.000652 0.000217 1.099056 0.350169
Residual 246 0.048637 0.000198
Total 249 0.049289
Coefficients
Standard
Error t Stat P-value Lower 95%
Upper
95%
Lower
95.0%
Upper
95.0%
Intercept 0.000380909 0.00089 0.427991 0.669032 -0.00137 0.002134 -0.00137 0.002134
Lag 2 0.113199299 0.063782 1.774779 0.077171 -0.01243 0.238828 -0.01243 0.238828
Lag 3 0.007945121 0.064332 0.123502 0.901811 -0.11877 0.134657 -0.11877 0.134657
Lag 4
-
0.017024478 0.064132 -0.26546 0.790876 -0.14334 0.109293 -0.14334 0.109293
Table 3COCA COLA HOLDING AG PACF
Regression Statistics
Multiple R 0.183819
3