Posted: November 9th, 2022

N1611 Financial Econometrics – Coursework #1

N1611 Financial Econometrics – Coursework #1

2022-23

Coursework Pointers

• The Assessment for N1611 Financial Econometrics module is by two items of coursework. That is the primary coursework and it’s price 30% of the general Assessment of the module.
• The coursework consists of understanding theoretical fashions, together with knowledge manipulation, Assessment and interpretation. Please observe that that is NOT a bunch train. Though you might focus on the mission with others, the coursework Assessment and dialogue have to be labored out and written up individually. You could obtain diminished or no marks if there are robust similarities between the work handed in by two or extra folks.
• Candidates ought to try ALL questions.
• Your reply to every Question Assignment ought to INCLUDE the complete references of the articles, books and different sources cited. You’ll be able to current the references on the finish of your solutions and dialogue to all questions.
• Info on the place to seek out materials: The fabric for use to reply the questions is on the Canvas website. Nevertheless, college students are anticipated to do their very own analysis and are inspired so as to add different sources.
• STATA output ought to NOT be copied and pasted straight into the mission. It is best to current your outcomes (e.g. regression output) as it could seem in revealed tutorial analysis papers. (Take a look at some revealed journal articles –sometimes the output is in Tables, typically offered as estimated equations with s.e./t stats/p-values in brackets below the corresponding coefficient, along with applicable diagnostic statistics and their p-values).
• It is best to all the time remark in your estimation outcomes, i.e. what’s the instinct behind your empirical findings.
• The phrase depend of the mission have to be printed on the primary web page of the coursework. The utmost phrase depend is 1500, e.g., you might break up this phrase depend throughout the questions. The tables, references and appendices aren’t included within the phrase depend.
• Word that your coursework is to be submitted electronically by way of Canvas. Please examine for the deadline of submitting your work on Canvas module website (below “Assignments” part). For extra data concerning the deadline or points on submitting your work, please examine with the UG College workplace (at this electronic mail:).
• Add your phrase (or pdf) doc by means of the “E-submissions” hyperlink on the module’s Canvas website by the deadline. There is no such thing as a have to add or submit the information or STATA estimation file.
• Late submissions might be handled based on college rules. Extra data on Assessment rules could be discovered right here:

Coursework Questions

You’re given month-to-month knowledge of the U.Ok. Shopper Value Index (CPI) over the interval 1991M1 to 2022M7. The info file identify is “CPI.xls”, uploaded on Canvas alongside this file. First calculate the UK inflation fee, i.e., ∆cpit= cpit – cpit-1, the place cpit is the pure logarithm of the CPI at time t and ∆ is the primary distinction operator. Then:

a) Clarify the Field-Jenkins method in constructing an ARMA(p,q) mannequin for ∆cpit.
[25%]
b) Use the complete pattern interval to acquire a graph of the ∆cpit sequence. Primarily based on the graph, does the sequence look like stationary? Touch upon the behaviour of this sequence over time.
[10%]
c) Clarify the phrases autocorrelation operate (ACF) and partial autocorrelation operate (PACF). What form would these two capabilities take for a stationary autoregressive course of, a transferring common course of, and an autoregressive transferring common course of?
[10%]
d) Acquire the autocorrelation operate (ACF) and partial autocorrelation operate (PACF) for the ∆cpit sequence (specify the variety of lags to be 6) utilizing knowledge from 1991M1 to 2020M12 (Word that this isn’t the complete pattern). Focus on the importance of the ACF and PACF coefficients and determine the appropriate fashions that you’d estimate.
[10%]
e) Estimate all ARMA fashions from order (zero, zero) to (6, 6) for the ∆cpit sequence over the shorter pattern interval 1991M1 to 2020M12. Out of your estimations, which is the appropriate mannequin order? Clarify why? (You’d additionally have to report all related data for the fashions that you simply estimate, together with the worth of the AIC and SBIC and different related required standards in a Desk).
[20%]
f) Re-estimate solely the appropriate mannequin(s) recognized from Question Assignment (e). Once more, use solely the pattern 1991M1 to 2020M12. Report and touch upon the outcomes. Carry out diagnostic checks on the residuals from these estimated mannequin(s). Do the mannequin(s) match the information properly?
[10%]
g) Use the mannequin(s) estimated in Question Assignment (f) to generate one step forward (static) forecasts for the interval 2021M1 – 2022M7. Create a graph of the particular ∆cpit sequence and the forecasts that you’ve got generated over the desired out-of-sample interval. Touch upon the outcomes.
[15%]

Conduct all of your statistical assessments on the 5% degree.

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