How to deal with heteroscedasticity and autocorrelation

Assignment Help Microeconomics

Reference no: EM131289899

Economics

Word Limit 2500 words (excluding appendix and reference list)

Refer to the Journal Article Attached as a guide on how to report the results of the data analysis.

Use SPSS OR STATA as the preferred software for data analysis.

Please RESPOND if you can comfortably handle this paper. Jokers and time for trial and error is not allowed!!

FURTHER INSTRUCTIONS

1. You can use the rate of return that you find more appropriate. You might want to justify your choice. We have seen many time in the lectures and tutorials how to compute a percentage change of a variable. You can find more information here https://en.wikipedia.org/wiki/Rate_of_return.

2. By the end of the course we will have considered three different diagnostic tests: tests for normality, homoscedasticity and no-autocorrelation (last lecture) of the residuals. We shall have learnt how to deal with heteroscedasticity and autocorrelation.

3. Please assume that the variables in model (1) and (2) are stationary; you don't to test for stationarity.

4. There is no need to transform FED to run the regression; just keep in mind that FED is annualized when you interpret the results.

5. No particular structure of the assignment is required. Please answer each question precisely and concisely. The 2,500 words limit is an upper bound, there is no lower bound (no minimum amount of words).

6. In question 2, you are referred to the paper by C. Ioannidis and A. Kontonikas (2008), "The impact of monetary policy on stock prices", Journal of Policy Modelling 30, 33-53. The paper might be helpful as a general reference to complete the assignment.

7.Strictly use E-views software in this assignment.

Attachment:- Attachments.rar

Reference no: EM131289899

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