AF7004: Financial Econometrics and Forecasting I - Accounting and Finance Assignment Help

Assignment Task:

Task:

You are required to answer the following:

1) Explain the advantages of panel data models. (20 marks, 500 words approx.)

2) Determine using the Hausman’s test which panel data model will be appropriate to estimate the above model, i.e. whether it should be a fixed effect model or a random effect model. Present the results of the above model and comment on the impact of the macroeconomic factors on the panel of returns of the industry portfolios that you have selected after controlling for the Fama and French (1992, 1996) and Carhart (1997) factors. (20 marks, 500 words approx.)

Draft Assessment Brief – Postgraduate 

Section B (30 marks) Using the data from the UK stock market, analyse the extent of the intervalling effect in the estimation of stocks’ beta (β) parameters. You are required to answer the two questions listed below. Please follow the instructions in these questions.

Requirements: 3) Select 15 companies from the UK market and download their stock price data from Bloomberg. The sample period should include the last full 5 calendar years: from 2015 to 2019. Your selection should cover companies of different sizes, i.e. 5 large stocks, 5 medium size stocks and 5 small stocks. Discuss briefly the stocks which you have chosen and then use the CAPM model (in the market model version, i.e. without a deduction of the risk free rate) to estimate in EViews their betas (β) for daily and monthly frequency data. Discuss the econometric issues, which are related to your estimations. (20 marks, 200 words approx.)

4) Summarize and discuss your findings about the extent of the intervalling effect in the estimation of the beta (β) parameter in case of all your 15 stocks and discuss any patterns that you found across your results from the point of view of the differences in daily and monthly beta (β) estimates and the stocks size. (10 marks, 800 words approx.) Section C (40 marks, 1000 words) Select any 10 out of the 49 Industry Portfolio returns of your choice along with the three Fama and French (1993, 1996) factors (MKT, SMB and HML) and the Carhat (1997) factor (MOM) from the following website: https://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data_library.html

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