QUANTITATIVE ANALYSIS OF FINANCIAL-财务管理质量分析-留学生财务管理毕业论文代写，DEPARTMENT OF ECONOMICS
ECON 90033
QUANTITATIVE ANALYSIS OF FINANCIAL
MARKETS 1
CONTINUOUS ASSESSMENT EXERCISE
This exercise is assessable and will count for 30 per cent of the total mark in this,subject.
Due: 12:00 Monday 9th May Wood Theatre, Faculty of Economics and Commerce,
Please note that as assignments will be returned during the week of 16th May latesubmissions will not be accepted.
Students should attempt both questions. Question 1 is worth 10 marks. Question 2 is
worth 20 marks.
Plagiarism will not be tolerated. This is not a group assignment. You are allowed todiscuss the exercise with your friends and colleagues. You are not allowed to submitwork that is substantially taken from the work of others and is not the result of your ownindividual efforts. Plagiarism will result in the loss of some or all of your marks for thisassignment.
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Question 1
Consider the multiple regression model
Yt = β 1 +β 2 X2,t +β 3X3,t + ut .
The estimated version of the model, obtained by Ordinary Least Squares, using 40
observations is:
029
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The figures in parentheses are the estimated standard errors. The coefficient of multipledetermination for the regression is 0.81.
(a) Test the null hypotheses H0:β j = 0 for j=1, 2, 3, against the appropriate twotailedalternative hypothesis at the 5% level of confidence. Why is the Students-tand not the Normal Distribution used in performing these tests?
(2 marks)
(b) Test the null hypothesis H0:β 2 = β 3 = 0 , using an F statistic.
(3 marks)
(c) How can you reconcile the results in part (a) and (b)? What are the implicationsof these results for estimating the parameters of the model? Hint: You mayassume that there is evidence of correlation between X2 and X3.
(5 marks)
(Total 10 marks)
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Question 2
If markets are integrated, the International Capital Asset Pricing Model implies that theexpected return in country k is given by
( k ,t ) f k ( W,t ) f E R = r +β ⎡⎣E R − r ⎤⎦Here f r represents the risk free rate, k ,t R represents the return on the stock indexfor country k, and W,t R represents the return on the World equity index, a proxy for themarket portfolio.
Using data on the excess return to the Hong Kong equity market, k ,t f ,t R − r and
the excess return to the World Equity Index, W,t f R − r , sampled weekly over the period
January 1st, 1973 to 21st July 2003, the following estimates were obtained using Ordinary
Least Squares
Table 1.1
Dependent Variable: k ,t f ,t R − r
Method: Least Squares
Sample (adjusted): 1/01/1973 7/21/2003
Included observations: 1595 after adjustments
Variable Coefficient Std. Error t-Statistic Prob.
C 0.003517 0.109617 0.032085 0.9744
W,t f R − r 1.104860 0.053671 20.58589 0.0000
R-squared 0.210127 Mean dependent var 0.147037
Adjusted R-squared 0.209631 S.D. dependent var 4.914335
S.E. of regression 4.368977 Akaike info criterion 5.788188
Sum squared resid 30407.12 Schwarz criterion 5.794927
Log likelihood -4614.080 Hannan-Quinn criter. 5.790691
F-statistic 423.7788 Durbin-Watson stat 1.969824
Prob(F-statistic) 0.000000
(i) Carefully interpret the output in Table 1.1.
(3 marks)
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On the 19th of October 1987, there was a crash in world equity markets. Let t Change be a
dummy variable that takes the value of 0 before 19th of October 1987 and 1 afterwards.
The following estimates were obtained using Ordinary Least Squares
Table 1.2
Dependent Variable: RHKP
Method: Least Squares
Sample (adjusted): 1/01/1973 7/21/2003
Included observations: 1595 after adjustments
Variable Coefficient Std. Error t-Statistic Prob.
C 0.528586 0.261803 2.019021 0.0437
W,t f R − r -0.250152 0.137273 -1.822300 0.0686
t Change 0.421057 0.367760 1.144925 0.2524
t W,t f Change × ⎡⎣R − r ⎤⎦ -0.259977 0.181990 -1.428521 0.1533
R-squared 0.013393 Mean dependent var 0.147037
Adjusted R-squared 0.011533 S.D. dependent var 4.914335
S.E. of regression 4.885914 Akaike info criterion 6.013095
Sum squared resid 37980.61 Schwarz criterion 6.026573
Log likelihood -4791.443 Hannan-Quinn criter. 6.018101
F-statistic 7.199358 Durbin-Watson stat 1.965929
Prob(F-statistic) 0.000084
(ii) Carefully interpret the output in Table 1.2. Is there statistically significant
evidence that the Crash of 1987 led to a permanent change in the riskiness of the
Hong Kong market? Justify your answer.
(5 marks)
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On the 19th of October 1987, there was a crash in world equity markets. Let t Crash be a
dummy variable that takes the value 1 in the week of 19th October 1987 and zero
otherwise. Similarly let t Change be a dummy variable that takes the value of 0 before
19th of October 1987 and 1 afterwards. The following estimates were obtained using
Ordinary Least Squares
Table 1.3
Dependent Variable: k ,t f ,t R − r
Method: Least Squares
Sample (adjusted): 1/01/1973 7/21/2003
Included observations: 1595 after adjustments
Variable Coefficient Std. Error t-Statistic Prob.
C -0.010173 0.155884 -0.065259 0.9480
W,t f ⎡⎣R − r ⎤⎦ 1.053240 0.081736 12.88593 0.0000
t Crash -29.18990 4.397063 -6.638499 0.0000
t Change 0.075070 0.216746 0.346349 0.7291
t W,t f Change × ⎡⎣R − r ⎤⎦ -0.000866 0.108215 -0.008006 0.9936
R-squared 0.231775 Mean dependent var 0.147037
Adjusted R-squared 0.229842 S.D. dependent var 4.914335
S.E. of regression 4.312753 Akaike info criterion 5.764160
Sum squared resid 29573.74 Schwarz criterion 5.781008
Log likelihood -4591.917 Hannan-Quinn criter. 5.770417
F-statistic 119.9265 Durbin-Watson stat 1.997558
Prob(F-statistic) 0.000000
(iii) Carefully interpret the output in Table 1.3. How confident are you about your
conclusions to part (ii) of this question? Justify your answer.
(6 marks)
(iv) Outline two further approaches to testing for a permanent change in the riskiness
of the Hong Kong market.
(6 marks)
(Total: 20 marks)
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Plagiarism
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infringement of that Rule:
a) the submission of an answer substantially similar to that submitted by a student in
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in the case of joint work, not based on the work of those named as having done the joint
work herein); or
c) the submission of an answer containing substantial quotations from another work
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