Topic: Empirical Finance questions and answers assignment

In your answers to the questions below, you should present your Eviews equation estimation output as it would be in published academic papers. (Examine several such papers, the approaches to presentation are fairly standard.) Raw Eviews output should be included only in an Appendix. 

The data required for the coursework is contained in the excel files `Monthlyfactors.xls’ and ‘vw_sizebm_25.xls’ in the coursework section on Moodle. The file `Monthlyfactors.xls’ contains monthly factor return data from October 2010 to December 2017 that we will use to estimate two standard asset pricing models: the classical CAPM and the Carhart four-factor (FF plus momentum) model. The variables in the Excel file are: `RF’ containing the risk-free rate, `MktRF’ containing the excess return on the market portfolio (the single factor in the classical CAPM model), `SMB’ containing the small-minus-big factor from the FF three- factor model, `HML’ containing the high-minus-low factor from the FF three-factor model and  `UMD’ containing the Carhart momentum factor. The second file (vw_sizebm_25.xls) contains the 25 value-weighted size and book-to-market portfolios of FF.

Choose one of the 25 portfolios and answer the questions below.        

Question 1 (10 points)

Describe briefly your selected portfolio and report descriptive statistics for it and the factors. These statistics should be in a nicely formatted table within the main text, with Eviews output in the Appendix. Briefly comment on these statistics.

Question 2 (20 points)

Estimate the CAPM model for your selected series using OLS in Eviews. Comment in detail on your regression output. State/interpret the magnitude and statistical significance of the slope coefficient estimates and the statistical significance and fit of the overall regression.

Question 3 (30 points)

Estimate the CAPM model for your selected series using quantile regression in Eviews for a set of quantiles ranging from 0.1 to 0.9. Comment in detail on your regression output. State/interpret the magnitude and statistical significance of the quantile slope coefficient estimates and compare them with the OLS estimates in Question 2.   Perform an equality coefficient test across quantiles.

Question 4 (20 points)

Estimate the Carhart 4-factor model for your selected series using OLS in Eviews. Comment in detail on your regression output. State/interpret the magnitude and statistical significance of the slope coefficient estimates and the statistical significance and fit of the overall regression.

Question 5 (20 points)

Estimate the Carhart 4-factor model for your selected series using stepwise regression in Eviews. Comment in detail on your regression output. State/interpret the magnitude and statistical significance of the slope coefficient estimates and compare them with the estimates in Question 4.

Type of service-Academic paper writing
Type of assignment-Essay
Subject-Finance
Pages / words-4 / 1000
Number of sources-4
Academic level-Undergraduate
Paper format-Harvard
Line spacing-Double
Language style-UK English

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