The file P02_18.xlsx contains daily values of the Standard & Poor’s 500 Index from 1970 to early 2012. It also contains percentage changes in the index from each day to the next.
a. Create a histogram of the percentage changes and describe its shape.
b. Check the percentage of these percentage changes that are more than k standard deviations from the mean for k = 1, 2, 3, 4, and 5. Are these approximately what the empirical rules indicate or are there “fat” tails? Do you think this has any real implications for the financial markets?