Econometrics

1. assignment due for tomorrow in the afternoon
2. 3000 words + the graphs
3. please adhere to the excel document attached and work out the question using my excel data
4. please refer to the different tests i have conducted – the unit root test, the arch test, the regression and the descriptive stats
5. make tables and graphs with my data

1- Calculate the daily return for your 10 firms and related index. Plot average and each firm returns against market return and comments on the shape, distribution and correlation. Calculate the descriptive statistics and discuss the result.

2- Estimate the CAPM (Ei − r = βi (EM − r )), assuming the risk free rate is the same for all days over each month (assume the monthly rate as daily rate). Interpret the result and comments on the reliability of the result by doing all diagnoses tests.

3- Explain why it is more reasonable to use daily return rather than stock price based on the properties of time series. This should be based on reasonable tests of time series of return and stock prices regarding stationarity and forecasting based on your firms and index.