Essays on Introduction to Financial Econometrics Assignment

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The paper “ Introduction to Financial Econometrics” is a comprehensive example of a finance & accounting assignment. This essay examines the link between monthly share price and returns for a given stock. It again tries to find out if the data is randomly distributed other than examining whether the log series follows a normal distribution or not. The paper also performs a CAPM analysis for the data and test whether the log series is stationary or not. This was done according to some questions given as: Question aAfter data was gathered and worthy log calculations are done, we looked into the variables that affect stock share prices.

The study model will be explained by the help of these variables though there were various other variables those shaped stock prices indexes. The conclusion of this paper was however entirely dependent on the above determinants. The dependent variable was the log prices of monthly stock and the independent variable was the log-returns of the stock. In use were many statistical models to issue graphs and descriptive statistics that examine the log share prices and log-returns of our company.

Some of the tests under this subject were; Test for Randomness A run test was put underway to see if the observations are serially independent- that is whether they happen in random order by counting how many runs up or below a threshold. Normality test A series of normality tests were also conducted for log return series, noting that there is a possibility of an effect on outliers analyzed in the past point. Techniques that were used descriptively are; mean median, standard deviation, and percentile to describe the main indicators of each of the return series. A descriptive summary statistic results were arrived at as displayed in tables 1 Table 1: Descriptive summary statistics Variable Obs    Mean  Std.

Dev.             Min  Max Log share prices 240 2.45508  0.195333 2.021189    2.86629 Log returns 240 0.38161 0.513098    -0.6349803    0.8749281 The mean for log share prices and log returns was calculated as 2.45508 and 0.38161 respectively. On the other side, the variance, that is, the deviation from these mean were 0.195333 and 0.513098    for log share prices and log returns respectively.    

Reference

Chandra, P. 2008. Investment analysis and portfolio management. S.l.: Tata Mcgraw-Hill.

Chapman, R. J. 2013. Simple tools and techniques for enterprise risk management. Hoboken,

N.J: Wiley.

Elton, E. J. 2010. Modern portfolio theory and investment analysis. Hoboken, NJ: J. Wiley &

Sons.

Vollmer, M. 2014. A beta-return efficient portfolio optimization following the CAPM: An

analysis of international markets and sectors.

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