Solutions Statistics

Solution) (a) Consider the following data for the Nikkei 225 returns for the period between January 2009 and D

Question:

(a) Consider the following data for the Nikkei 225 returns for the period between January 2009 and December 2009:

Date

Nikkei 225 Returns

Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

6.22
-12.04
-5.74
9.65
8.26
7.56
3.91
4.71
0.95
-3.64
-1.68
-6.28

You are required to:

(i) Explain the basic time series models of the random walk (RW), historical mean (HM), moving average (MA) and exponential smoothing (ES). (20 per cent of the marks)

(ii) Calculate the RW, MA at three months, HM and ES with alpha = 0.1 for these data. (40 per cent of the marks)

(b) Critically discuss the consequences of including a non-stationary series in a regression model and identify and explain possible means of addressing and testing for this problem. (40 per cent of the marks)

Price: $2.99

Solution: The answer consists of 4 pages
Deliverables: Word Document