Reference no: EM131950777

ANALYTICAL METHODS MAJOR ASSIGNMENT -

You are analysing U.S stock markets. You have been provided the weekly adjusted close price for NASDAQ (National Association of Securities Dealers Automated Quotations) Composite index, The S&P 500 (Standard & Poor's 500) index; Intel Corporation (INTC), and Microsoft Corporation (MSFT) for the period of January 2009 - December 2017. Data available via Resources - Assessment resources -- Assignment folder.

Please complete the following questions:

1. Calculate weekly discrete returns (hint: holding period returns) for the NASDAQ index, S&P 500 index, Intel Corporation (INTC) and Microsoft Corporation (MSFT) stocks prices, respectively.

2. Which one has the highest relative risk among the weekly returns of NASDAQ index, S&P500 index, INTC and MSFT? Provide evidences.

3. What's the empirical probability of the weekly returns of Intel Corporation (INTC) being negative; What's the empirical probability of the Microsoft Corporation (MSFT) returns above 0.5%;

4. Test whether the mean returns of NASDAQ index is significantly different from zero at the 1% level of significance. Test whether the mean returns of S&P500 index is significantly different from 0.5% at the 5% level of significance.

5. What is the covariance of NASDAQ index returns and S&P500 index returns? What is the correlation coefficient between the Microsoft Corporation stock returns and Intel Corporation stock returns?

6. In order to predict the weekly Intel Corporation (INTC) returns, your supervisor advised two linear regression models:

Model A: Assuming a linear relationship between INTC returns and S&P 500 index returns.

Model B: Assuming a linear relationship between INTC returns and MSFT returns and S&P500 index return jointly.

6.1: For model A, is the intercept coefficient significant at 5% level?

6.2: For model A, Construct the 99% confidence interval for the slope coefficient, and interpret it.

6.3: For model B, determine if the MSFT returns and S&P500 index return are jointly statistically related INTC returns at the 1% significance level?

6.4: Which model you would recommend to your supervisor, and why?

Attachment:- Assignment Files.rar