Financial econometric with MATLAB paper

> 4-5 Pages Total

> Subject - Financial econometrics under calculation of Matlab

> Requirement:

> Please use data to deal with questions within Matlab. The questions are related to financial econometrics and conclusion should be got under calculation of Matlab.

1. Use the S&P 500 excess returns and inflation to predict Intel stock excess returns.

(a) Provide the regression equation for the Intel stock excess returns when using S&P 500 excess returns and inflation as explanatory variables.

(b) What is the proportion of variation in Intel stock returns that can be explained by the market returns and inflation?

(c) What can you say about the significance of the regression coefficients?

2. Data in ElectricityPrices.xlsx contains intraday electricity prices in 2013. Assume that prices are generated from the following model:

y_t = y_t-1 + βy_t-1 + √|y_t-1|ε_t, t = 2,......T    (1)

where  ε_t are i.i.d N(0,1).

(a) Provide the maximum likelihood estimate of β. Note: the decreasing time ordering of the data.

(b) Test the hypothesis whether β is significantly different from zero at the 5% sig- nificance level.

(c) Provide the log-likelihood value at the maximum.

3. Assume now that prices in ElectricityPrices.xlsx are generated from the following model:

y_t = y_t-1 + βy_t-1 + σ,|y_t-1|ε_t, t = 2, . . . , T (2)

where ε_t are i.i.d. N (0, 1).

(a) Provide the maximum likelihood estimates of β and σ.

(b) Provide the log-likelihood value at the maximum. How does it compare to the value obtained in 2.c)?

Attachment:- ElectricityPrices(1).xlsx