ETF5952: Quantitative Methods for Risk Analysis - Accounting and Finance Assignment Help

ASSIGNMENT TASK:

TASK:

Question 1
This question asks you to analyze the data, “Treatment”, in the “Ecdat” package. Load the Dcdat package and show variables in the data set “Treatment”. Before your analysis, check variables in the data set by either reading a pdf file for Dcdat, which can be easily found by searching on-line information.

1. This data set contains information on individuals. Some of the individuals received a job training program. We are interested in the treatment effect of the program. Use individuals’ wage before treatment (re75) and wage after treatment (re78) to obtain differences of wages for each individual (i.e., re78-re75). We call the difference diff. Report the summary statistic of two variables: diff and treat.

2. Obtain the mean of diff for treated and untreated individuals separately, and then obtain the average treatment effect (ATE). Also, obtain the 95% confidence interval for the ATE estimator. Report the means, the ATE, and the 95% confidence interval.

3. Report one figure of box plot of diff separately for treated and untreated individuals.
4. First, regress diff on an intercept and treatment status. Next, add regressors: age, educ, ethn and married. Report the regression results and interpret effectiveness of the job training program. (no more than 30 words).
 

Question 2 

For this question, use a data set, “cases daily state.csv”, which includes positive cases of COVID-19 in states of Australia. Use the variable of case counts for Victoria (VIC).

1. Report a histogram of case counts in VIC.
2. Report a time-series plot of case counts in VIC.
3. Report a plot of auct-correlations. Explain serial dependency in the data (no more than 30 words).
4. Estimate an AR(1) model. Report the estimation result and a time-series plot of the fitted values together with the observed case counts. Given the estimation result, explain time-series dependency in the data (no more than 30 words).
 

Question 3 (35 points=5+10+10+10)

Let R1 and R2 be investment returns, which are random, and they are independent from each other (no relation statistically). Consider the best investment strategy under the setup provide below.

1. Suppose that R1 takes $10 with a chance of 50% or -$5 with a chance of 50%, and also that R2 takes $2 with a chance of 80% or $1 with a chance of 20%. Answer the expected return from each investment and choose the best investment for risk neutral investor.

2. Under the setup in 1, choose the best investment when you make decision, using maximax and maximin.
3. Consider the case in which R1 ∼ N(10, 5 2 ) and R2 ∼ N(5, 3 2 ). Let R0.5 = 0.5R1 + 0.5R2 be a portfolio.

Obtained the expected return and variance of the portfolio R0.5.

4. Given the setup in 3, we can consider a various of portfolios, denoted by Rω = ωR1 + (1 − ω)R2, for a weight ω ∈ [0, 1]. Using simulation with 1,000 time replications, evaluate four portfolios with ω= 0.2, 0.5, 0.8 and 1.0. Report a table of the expected value, variance and Value-at-Risk 5% of simulated returns. Also, explain which portfolio is the best according the expected value and Value-at-Risk 5%.

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