Hello, dear friend, you can consult us at any time if you have any questions, add WeChat: zz-x2580
MANG 6008 Assessment: Group Coursework Weighting: 20%
Quantitative Research in Finance
Method of
Submission
:
Electronic via Blackboard Turnitin ONLY (You are not required to submit a hard
copy)
(Please ensure that your name does not appear on any part of your work)
Any work submitted after 16:00 on the deadline date will be subject to the standard University late penalties (see
below), unless an extension has been granted, in writing by the Senior Tutor, in advance of the deadline.
University Working
Days Late: Mark:
1 (final agreed mark) * 0.9
2 (final agreed mark) * 0.8
3 (final agreed mark) * 0.7
4 (final agreed mark) * 0.6
5 (final agreed mark) * 0.5
More than 5 0
This assessment relates to the following module learning outcomes:
A. Knowledge and Understanding A1. Demonstrate a critical understanding of the basic theory of financial econometrics;
A2. Demonstrate a critical understanding of some specific applications of such theory;
A3. Apply such understanding to a specific empirical project;
A4. Demonstrate competence in using a basic econometrics software package.
B. Subject Specific Intellectual and Research
Skills
B1. Demonstrate quantitative skills in evaluating numerical data.
C. Transferable and Generic Skills C1. Demonstrate skills in utilizing analysis software.
Group Coursework Brief:
You should be aware that all members of your group share responsibility for any academic integrity
breaches or other issues that may arise from your group’s coursework submission. PLEASE NOTE
THAT ONLY ONE MEMBER OF THE GROUP SHOULD SUBMIT THE ASSIGNMENT TO
BLACKBOARD TURNITIN.
(i) STATA will be used for estimations and tests. Assume, where relevant the significance level
of 5%.
(ii) You should be aware that all members of your group share responsibility for any academic
integrity breaches or other issues that may arise from your group’s coursework submission.
(iii) Each member of a GROUP must share equal responsibility of work. The awarded mark to
a group implies that each member of that GROUP receives the same mark as others in the
same group.
Variable definitions:
, = 100 ∙ � ,,−1�, where , is the price of a cryptocurrency at time . The return on cryptocurrency
is measured in daily percentage.
, = ∑ ,=1 , is the market return (in daily percentage), calculated as a weighted average of returns on
cryptocurrencies at time . The weight is calculated as the market share of cryptocurrency at time .
IMPORTANT NOTE: You MUST answer each part of the question separately and clearly.
Required for Question ONE
a) Summarise the descriptive statistics of the series and (mean, median, standard deviation, minimum,
maximum, skewness, kurtosis, Jarque-Bera test statistic, and p-value of the Jarque-Bera test statistic). Discuss
the results.
b) Consider the regression model outlined in the following equation:
, = + , + ,,
Where , is the return on a cryptocurrency at time , , is the cryptocurrency market return, and ,
is the random disturbance term. What assumptions would you make on the random disturbance term and/or
the explanatory variable so that the estimated coefficients are BLUE? Explain your answer.
c) Estimate by means of OLS the regression considered in b). Summarise the goodness of fit of the model and
describe the statistical significance of each coefficient estimate. Comment on the results.
d) Suppose an analyst wishes to ascertain if > 1. Outline the null and alternative hypotheses for this test.
What is the intuition of the null and alternative hypotheses? Perform the test and comment on the result.
e) Perform a test of heteroscedasticity in the residuals from the equation considered in b). Comment on the
result. What inferences would you make in the presence of heteroscedasticity? What methods would you
employ to remedy the presence of heteroscedasticity?
f) Perform a test for serial correlation in the residuals from the equation considered in b). Comment on the
result. What inferences would you make in the presence of serial correlation? What methods would you
employ to remedy the presence of serial correlation?
g) Perform a critical review of scholarly articles (maximum 300 words) that study the determinants of
cryptocurrency returns by means of regression models. Discuss the intuition of the key determinants. Where
possible, briefly analyse the estimated effects on cryptocurrency returns in terms of their significance, signs
and strength.
For your guidance, feel free to you the Academic Journal Guide (AJG) here https://charteredabs.org/academic-journal-
guide-2021/. You would need to register to the AJG, but registration is free. 2 and above rated journals are considered
of acceptable quality, but some exceptions are allowed.
[50 marks]
[Maximum 1000 words]
SEMESTER 2 2021/22
Question TWO
Question TWO requires to use the same data file as for Question ONE.
Reqired for Question TWO
a) Depict on a time series graph and discuss if there is evidence of volatility clustering in the data. Comment
on the result.
b) Calculate the squared and depict graphically the correlation and partial correlation functions of the
squared . Comment on the result.
c) With respect to the series , test for the presence of conditional heteroscedasticity in the residuals of the
conditional mean model, formulated as in Question One, , = + , + ,. Perform the LM-ARCH
test for lag orders 1 and 7. Comment on the results. Is there evidence of conditional heteroscedasticity in the
residuals? Please use the same conditional mean model in d) and e) below.
d) Proceed to estimate ARCH(p) models with p=1,…,7. Summarise the estimated models in a table. Discuss
the results. Which of the estimated models provides the best fit? The conditional mean model is as in c).
e) Now estimate the conditional variance using GARCH(1,1) and TGARCH(1,1) models. Discuss the results.
Which of the two models provides the best fit? The conditional mean model is as in c).
f) Now estimate a GARCH(1,1)-M model, in which the conditional mean model is formulated as , = +
, + Λ,−12 + ,. Comment on the results.
[25 marks]
[Maximum 500 words]
Question THREE
Question THREE uses monthly data on market yields (interest rates) on corporate and sovereign bonds.
The workfile interest rates.dta contains the data, retrieved from http://research.stlouisfed.org/fred2/. Your
group will be allocated ONE interest rate series.
AAA = Moody's Seasoned Aaa Corporate Bond Yield/Interest Rate
BAA = Moody's Seasoned Baa Corporate Bond Yield/Interest Rate
GS1M = Market Yield/Interest Rate on U.S. Treasury Securities at 1-Month Constant Maturity
GS3M = Market Yield/Interest Rate on U.S. Treasury Securities at 3-Month Constant Maturity
GS6M = Market Yield/Interest Rate on U.S. Treasury Securities at 6-Month Constant Maturity
GS1 = Market Yield/Interest Rate on U.S. Treasury Securities at 1-Year Constant Maturity
GS2 = Market Yield/Interest Rate on U.S. Treasury Securities at 2-Year Constant Maturity
GS3 = Market Yield/Interest Rate on U.S. Treasury Securities at 3-Year Constant Maturity
GS5 = Market Yield/Interest Rate on U.S. Treasury Securities at 5-Year Constant Maturity
GS7 = Market Yield/Interest Rate on U.S. Treasury Securities at 7-Year Constant Maturity
GS10 = Market Yield/Interest Rate on U.S. Treasury Securities at 10-Year Constant Maturity
GS20 = Market Yield/Interest Rate on U.S. Treasury Securities at 20-Year Constant Maturity
GS30 = Market Yield/Interest Rate on U.S. Treasury Securities at 30-Year Constant Maturity
Reqired for Question THREE
SEMESTER 2 2021/22
a) Depict the interest rate on a time series graph. Comment on the result.
b) Perform a unit root test on the interest rate. Is the variable I(0) or I(1)? Carefully outline the test equation,
as well as the null and alternative hypotheses for this test. Discuss if an intercept and/or linear trend need to
be included in the test equation.
