Assignment Task:

Economics and Business Department

Notes:

  1.  In order to solve these exam questions, you will need to install the TSA package first in case you haven’t already, then you will need to load it with the command library(TSA).

  2.  You can copy and paste your RStudio outputs to the corresponding questions, along with your written answers.

  3.  Your RStudio codes themselves can be pasted in the appendix section of your final document, along with the question numbers they are meant for.

 

I. In this exercise you will use time series analysis techniques to model and forecast monthly

S&P500 price index data.

  1.  Load the SP500 data file attached to this question file and examine its structure, on the basis of the information you will generate after having done the following:

  1. Plot the log(price)

  2. Plot the ACF as well as the PACF of log(price)

  3. Comment and specify what order of ARIMA model you would recommend.

b) Fit and examine the ARIMA model recommended in question a).

c) Examine the model residuals. Are the residuals well behaved? Are they reasonably independent

and normal?

d) Plot a 36 months dynamic and static ahead forecast of log(price) series, and make a comment

on your plot projections.

II. In this exercise you will analyze the volatility of monthly S&P500 returns.

  1.  Load the S&P price index data file, and examine its structure on the basis of the information you

will have gathered from doing the following:

  1. Use the S&P price index to calculate the S&P500 monthly returns.

  2. Plot the series of returns over the time.

  3. Plot the ACF and the PACF of the returns.

  4. Plot the ACF and the PACF of the squared returns.

  5. Compute the mean of the returns, and test whether the mean return is equal to zero or greater, with a 5% significance level.

  6. Comment and specify what GARCH model you would recommend.

b) Fit and examine the GARCH model recommended in question a).

c) If possible (if you can do that), examine the residuals

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  • Uploaded By : Mia
  • Posted on : October 13th, 2018

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