Reference no: EM131065264
Data and computation instructions
From Yahoo Finance download: IEI, IEF, and ^FVX and ^TNX.
Use the sample period: January 1, 2016-May 6, 2016.
Sort the data from oldest to newest.
Using the "log-ratio" method, compute the returns for IEI and IEF.
Compute the "first difference" of ^FVX and ^TNX and divide each series by 100 to convert it to a decimal measure of the return.
Compute the average and standard deviation of the IEI and IEF returns.
Do a regression of IEI returns on the first-difference of ^FVX/100.
Do a regression of the IEF returns on the first-difference of ^TNX/100.
In each of the pages for IEI and IEF, please display your data and results in a similar style to that I provided for SHY.
For your output in columns E, F and H, you must have formulas and not just numbers.
Answer questions in the spaces below.
NOTE: answering these questions requires that you do some research into what these financial variables represent.
1. Given our class discussions, do the relative values of the average and standard deviation of the IEI and IEF returns make sense? Explain your reasoning.
2. Which series is better explained by the changes in their respective interest rate ? Explain your answer referring to specific values in the regression output.
3. Which series is more sensitive to changes in the interest rate? Explain your answer referring to specific values in the regression output. Why would you expect this result? Would you expect one having greater sensitivity to changes in the respective rate than the other? Why?
Attachment:- Data.rar
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