Financial Econometrics

Assessed Coursework
Submission Deadline: 21st May 2021 (23:55 unit Moodle page)

This coursework (individual not a group work) counts for 45% of your overall assessment for this
module. Please submit your completed answers (a maximum of 7 A4 pages excluding the apprendix)
to the unit Moodle page. Please also submit all your Eviews workings copied in the appendix with
your coursework.

This coursework exercise should be completed individually. This coursework requires significant time
commitment.

Learning Outcomes
This coursework assignment assesses the following learning outcomes (LO) of the module:
1. Assess the properties and limitations of econometric methods as applied to the analysis of
financial data.
2. Formulate and test econometric models to examine different forms of financial data.
3. Evaluate the results of econometric analysis.

Word limit:
The maximum word count for this exercise is 2000 words that includes everything between the start
and completion of the answer, excluding tables, figures, foot - and endnotes, and appendices, but
including any in-text citations. 

References and additional material:

Help:
If you require any clarification regarding this coursework assignment, please utilise the Q&A forum on
the Module Moodle page to reach me. Please also make full use of the help facility in Eviews as well.

Software:
Eviews is the required software to carry out this coursework assignment.

Data:

You have been provided data about one stock downloaded from Yahoo Finance. The data file
containing your data is available on the Module Moodle page. The file name is your student ID
number. Please use the same data file which you have used for the first assignment for this Module.

Your Price series is p_adjclose_????.

The return series is ???? Continuously Compounded Ret

In answering the questions below, you may wish to consult the help option in Eviews.

1. For your series, in Eviews use the Genr option to calculate (i) the log of the price series, e.g.
e=log (p_adjclose_????), and (ii) the daily log returns (e.g. r=???? Continuously Compounded Ret).
Now, try to find the most appropriate ARMA(p,q) model for r by choosing the ARMA model (i.e. the
choice or orders p and q) that minimises the Schwarz criterion. Do this over the range of ARMA(p,q)
models defined by p = 0,1,2 and q = 0,1,2.

Now estimate your chosen ARMA model for the log return r series.

i. Test for the presence of ARCH effects in the residuals of this regression.
ii. Select and estimate an appropriate GARCH (p,q) model for the conditional variance of the
residuals of this regression.

Justify your choice of selected GARCH model using the information provided by:

i. The estimated coefficients (and their t-statistics or p values)

Now extend your selected GARCH model to include EGARCH and TGARCH effects.

Justify your choice of selected EGARCH and TGARCH model using the information provided by:

iii. The estimated coefficients (and their t-statistics or p values)

Interpret the chosen estimated EGARCH and TGARCH coefficients.

Professor Shabbar Jaffry

It is your responsibility to process your report through the University Turnitin software. If your
similarity score is higher than the maximum University recommended score of 24, your report
will be treated according to the University plagiarism regulations.

Marks and feedback will be made available in 20 working days (on or before 24th May 2021) of

the original deadline.

Professor Shabbar Jaffry

Brooks, Chris (2019), "Introductory Econometrics for Finance", Fourth Edition, Cambridge:
Cambridge University Press. (Chapters 6, 7, 8 and 9 for time series part of the Module).
University Grade criteria (Levels 4–8) – General (generic) criteria applicable to essays, reports
and aspects of projects and dissertations. However, your report is technical in nature and
criteria is quite general.

Grade Criteria
Rang
e
80+ As below plus:
 Outstanding work – contains accurate, relevant material, demonstrates
understanding of complex subject matter and is able to view it in a wider context.
 Shows originality and confidence in analysing and criticising assumptions,
is aware of the limits of knowledge. Likely to add new insights to the topic and
approaches the quality of published material.
 Evidence of extensive research, uses and presents references effectively.
 Outstanding quality in terms of organisation, structure, use and flow of
language, grammar, spelling, format, presentation, diagrams, tables etc.
70-79 As below plus:
 Outstanding work – contains accurate, relevant material, demonstrates
understanding of complex subject matter and is able to view it in a wider context.
 Shows originality and confidence in analysing and criticising assumptions,
is aware of the limits of knowledge.
 Evidence of extensive research, uses and presents references effectively.
Excellent in terms of organisation, structure, use and flow of language, grammar,
spelling, format, presentation, diagrams, tables etc.
60-69 As below plus:
 Very good work – contains most of the information required, is accurate
and relevant and demonstrates understanding of the subject matter and attempts
to view it in a wider context. Shows some originality of thought with good critique
and analysis assumptions, is aware of the limits of knowledge.
 Well-researched, good use and presentation of references.
 Very good in terms of organisation, structure, use and flow of language.
50-59 As below plus:
 Work that attempts to address the topic with some understanding and
analysis, key aspects of the subject matter covered.
 Research extends to primary sources. Appropriately cited and presented
references.
 Satisfactory presentation with respect to presentation, organisation,
language, grammar, spelling, format, diagrams, tables etc.
40-49  Adequate work which attempts to address the topic with limited
understanding and analysis.
 Some research using texts, Internet and key reference sources with
reference citation and presentation according to convention.
 An attempt to follow directions regarding organisation, structure, use and
flow of language, grammar, spelling, format, diagrams, tables etc.
30-39 FAIL – Anything which is inadequate in most or all of the following: length,
content, structure, analysis, expression, argument, relevance, research and
presentation. Work in this range attempts to address the question / problem but is
substantially incomplete and deficient. Serious problems with a number of
aspects of language use are often found in work in this range.
0-29 FAIL – No serious attempt to address the question or problem, and / or manifests
a serious misunderstanding of the requirements of the assignment. Acutely
deficient in all aspects.