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Questions:
1. (a) Define and discuss the Efficient Markets Hypothesis (EMH), in- cluding criticisms and limitations. (b) Explain how you might test the EMH using autocorrelations. What problems might arise in implementing these tests? (c) Briefly assess the empirical evidence for or against the EMH. 2. Define variance ratio tests, and discuss their use. 3. (a) Discuss L0 and MacKinlay's (Journal of Econometrics, 1990) model of non-trading (nonsynchronous trading). (b) Define the bid-ask spread for stock prices. Outline Roll's (Jour- nal of Finance, 1984) model of the consequences for stock price changes of a fixed bid-ask spread. 4. Discuss how to conduct an event study analysis of financial events (e.g., stock splits). What issues might arise and how might they be dealt with? 5. (a) Compare and contrast simple models of fundamentals versus bubbles to explain stock prices. (b) Discuss econometric tests to detect bubble behaviour. (c) Explain how you might use predictive regressions to assess long- horizon predictability of returns. What problems might arise in interpreting these predictive regressions? 6. (a) What stylised features of financial market data could be mod- elled by ARCH or GARCH models? Outline the key properties of the GARCH(1,1) model. How might it be modified to allow for asymmetric volatility (e.g., leverage effects)? (b) Define and motivate the realized volatility of high-frequency re- turns. What alternative measures of volatilty might be used in the absence of data on high-frequency returns?
Design a simple econometric research project
Multiplicative decomposition method
The Australian government administers two programs that affect the market for cigarettes.
Solve the forecast model
What are the marginal abatement cost functions for each of the two areas? Calculate the loss in the two areas due to over-control (for the rural area) and under-control (for the urban area).
Explain why this model violates the assumption of no perfect collinearity. Write the t statistic for testing the null hypothesis
What is economics system? What are the types of economics system? Briefly explain each type of economics system by giving examples of nations that are close to each type
Determine when a competitively produced product generates negative externalities in production, the industry will,
Assume a company has the following production function: Q = 100 K.5 L1 . Currently, the company hires 1,000 workers and employs 100 units of capital.
M-commerce also known as mobile commerce is being lumped in with several strategic internet plans. Explain some of the industries that are likely to use mobile commerce and how it is working for them.
Auto Data manufactures custom engineering testing machine. The following 5-orders are currently in the design department:
Briefly discuss the difference between mechanism of an oral or English auction and a Vickrey or second price auction.
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