Hypothesis testing of means and variances equality

Assignment Help Other Subject
Reference no: EM132311057

Assignment -

You have been asked by your client to recommend which of two available stocks will perform better over time, relative to risk. You will need to compare the risk and return relationship of the two stocks over time and present your findings as a formal written report (detailing your calculations and findings).

The goal of this assignment is to

1. give you practice in performing the different types of quantitative analysis tasks often undertaken by Business graduates,

2. provide you with feedback on your ability to carry out such tasks, and

3. learn how and when to use different quantitative techniques covered in the last six (6) modules of the subject.

Now perform the following tasks.

Task A: Downloading the data

Download the data for S&P 500 index, Boeing Stock Price, General Dynamics Corp. Stock Price, and US TN (10 Year), using the links provided above and choosing Monthly Historical Data for all variables covering the period related to a group your Student ID belongs to.

Task B: Hypothesis Testing of Means and Variances Equality

1. Returns computation Calculate returns for these three series in Excel or any software of your choice using the transformation: rt = 100*ln(Pt / Pt-1) and perform the Jarque-Berra test of normally distributed returns for each of Boeing and GD stocks. What do you infer about the distribution of the two stock returns series? Specify the sampling distribution of the average returns of the two stocks.
Hints:
o We have computed stock returns in Workshop 02.
o If there are say "n+1" observations on prices, then the return series would have "n" observations.
o These numbers would represent percentages after multiplication with 100 in the formula above. But you would not include a percentage sign in your data. For example, returns for two periods are 0.35% and 0.41% but we would use 0.35 and 0.41 after omitting % sign in our excel worksheet.

2. Hypothesis testing of a single population mean (µ): Test a hypothesis that the average return on GD stock is different from 2.8%. Which test statistic would you choose to perform this hypothesis test and why? Also, specify the distribution of the test statistic under the null hypothesis, using a 5% significance level.

3. Hypothesis testing of homoskedasticity: Before investing in one of the two stocks, you first want to compare the risk associated with each of the two stocks. Perform an appropriate hypothesis test using a 5% significance level and interpret your results.

4. Hypothesis testing of two population means: Besides, you want to determine whether both stocks have the same population average return. Using the confidence interval approach, perform an appropriate hypothesis test given the information in your sample of 60 observations on returns at a 5% significance level. Report your findings and also mention which stock will you prefer and why? Note: You will not be given marks if you do not follow the confidence interval approach to test the hypothesis

Task C: Regression Analysis and Inference

5. Compute excess return on your preferred stock as yt = rt - rf,t and excess market return as xt = rM,t - rf,t and perform the following tasks.

a. Estimate the Capital Asset Pricing Model (Use the link below for the CAPM details) by regressing the excess return on your preferred stock (yt) on excess market return (xt) and properly report your regression results.
b. Interpret the estimated CAPM beta-coefficient in terms of the stock's riskiness in comparison with the market.
c. Interpret the value of R2.
d. Interpret a 95% confidence interval (CI) for the slope coefficient.

6. Perform a hypothesis test to infer whether your preferred stock is an aggressive stock.

7. One of the assumptions of the linear regression model is: Random errors are normally distributed. Perform an appropriate hypothesis test to determine whether it is plausible to assume normally distributed errors.

Analyse Data & Submit Report

Prepare your written report in two Parts:

Part A: Calculations
• Set out all your calculations for each of the tasks (listed above) using Data Analysis Tool in Excel. Present your results in graphs and charts as appropriate in the report to be submitted in a pdf file.

Part B: Interpretation
- Explain what your results mean, in language that your client can understand. For example, what conclusions can you draw from each of your findings?
- Your written report must be no more than TWELVE (12) pages in total, including all appendices, graphs, tables, and written answers. Answer the questions directly. Do not present unnecessary graphs or numerical measures, undertake inappropriate tests or discuss irrelevant matters.

Attachment:- Assignment Guideline.rar

Reference no: EM132311057

Questions Cloud

The evolution of technological solution : Consider how technology has evolved in your lifetime. These changes may impact how we work to find solutions to the global threats discussed so far.
The social ecology approach emphasizes : The social ecology approach emphasizes the view that certain social and physical characteristics of neighborhoods and communities influence the likelihood
The changing face of the war on drugs : Is drug addiction treated as crime or as medical issue in our society? How have these changes impacted social construction of drug addiction in our society?
Multi-national analysis of healthcare strategies : What is universal health care? Describe the healthcare system in at least one country that guarantees universal health coverage to all of its citizens
Hypothesis testing of means and variances equality : Different types of quantitative analysis tasks often undertaken by Business graduates - how and when to use different quantitative techniques covered
What is the key characteristic : 1. What is the key characteristic/behavior that every OD practitioner should have?
Discuss about the transformational leadership types : 1. Clearly define and discuss about the transformational leadership types 2. Describe a leader who personifies this leadership type.
Choose an organization that is currently operating : Choose an organization that is currently operating in Australia, preferably in the manufacturing industries.
Demonstrate an understanding of anatomy and physiology : NUR015-1 Health and Well-Being-Demonstrate an understanding of anatomy and physiology and its application to health and healthcare.

Reviews

len2311057

5/24/2019 1:01:21 AM

2. Hypothesis testing of a single population mean 8 3. F-test: Hypothesis testing to compare equality of variances in both stocks 8 4. Hypothesis Testing-Comparing Two Population Means 8 Task C 5. Regression Analysis and Inference Computing excess returns 1. CAPM estimation 2. Interpretation of CAPM-beta 3. Interpretation of R2 4. Interpretation of Confidence interval for 5 5 3 3 5 6. Hypothesis test of Aggressive Stock 8 7. Testing the assumption of normally distributed errors 8 Organisation of the report (Word Document) 8 Grand Total 100

len2311057

5/24/2019 1:01:11 AM

Description Marks Task A Downloaded the correct data 10 Task B Hypothesis testing (Means and Variances) 1. • Returns computation • Risk-return relationship • Jarque-Berra test of normality 9 4 8

Write a Review

Other Subject Questions & Answers

  Cross-cultural opportunities and conflicts in canada

Short Paper on Cross-cultural Opportunities and Conflicts in Canada.

  Sociology theory questions

Sociology are very fundamental in nature. Role strain and role constraint speak about the duties and responsibilities of the roles of people in society or in a group. A short theory about Darwin and Moths is also answered.

  A book review on unfaithful angels

This review will help the reader understand the social work profession through different concepts giving the glimpse of why the social work profession might have drifted away from its original purpose of serving the poor.

  Disorder paper: schizophrenia

Schizophrenia does not really have just one single cause. It is a possibility that this disorder could be inherited but not all doctors are sure.

  Individual assignment: two models handout and rubric

Individual Assignment : Two Models Handout and Rubric,    This paper will allow you to understand and evaluate two vastly different organizational models and to effectively communicate their differences.

  Developing strategic intent for toyota

The following report includes the description about the organization, its strategies, industry analysis in which it operates and its position in the industry.

  Gasoline powered passenger vehicles

In this study, we examine how gasoline price volatility and income of the consumers impacts consumer's demand for gasoline.

  An aspect of poverty in canada

Economics thesis undergrad 4th year paper to write. it should be about 22 pages in length, literature review, economic analysis and then data or cost benefit analysis.

  Ngn customer satisfaction qos indicator for 3g services

The paper aims to highlight the global trends in countries and regions where 3G has already been introduced and propose an implementation plan to the telecom operators of developing countries.

  Prepare a power point presentation

Prepare the power point presentation for the case: Santa Fe Independent School District

  Information literacy is important in this environment

Information literacy is critically important in this contemporary environment

  Associative property of multiplication

Write a definition for associative property of multiplication.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd