Reference no: EM133035603
7SSMM603 Research Methods - King's College London
Data Analysis Essay
Background:
As a researcher at the financial economics research department of the Federal Reserve Bank of New York in the United States. You were tasked by your supervisor, Alex, to investigate the relationship among equity market returns, financial market measures and economic activity indicators. Specifically, you were asked to analyse:
1. How the Chicago Board Options Exchange (CBOE) SKEW and VIX indices can explain ex post S&P 500 index returns. You were instructed to carry out the analysis with both daily and monthly data frequency setups. Alex suggested that one possible way to analyse the relationship is to use autoregressive class of models.
2. How the Industrial Production Growth in the United States can be explained by excess returns of S&P 500 index.
Assignment:
Prepare an analysis report on the issues raised above. You are required to:
a) describe the data sources and present relevant statistics including (but not limited to) descriptive statistics, regressions outputs and pre- & post- regression diagnostic tests;
b) discuss various econometrics issues (for e.g. serial correlation, stationarity of time series data, etc) related to the data you handle;
c) discuss the limitations of your analysis whenever applicable; and
d) discuss the implications of your findings with respect to policy recommendation and risk management.