Question
File Stock Prices shows the monthly stock prices for the US major indices, i.e., Dow Jones, Nasdaq, Nasdaq100, S&P500, and Malaysia major index, i.e., KLCI.
File Stock Prices shows the monthly stock prices for the US major indices, i.e., Dow Jones, Nasdaq, Nasdaq100, S&P500, and Malaysia major index, i.e., KLCI. The 210 observations cover from July 2002 to December 2019.
a) Estimate the influence of the US major index returns to the KLCI return.
b) Comment on their estimated parameter values.
c) Which stock return appears most significance? Which stock return appears most insignificant?
d) Do you think the regression results have been affected by multicollinearity issue? Why or why not?
e) If multicollinearity exists, can you improve upon your regression result by dropping any variable? Justify briefly your answer [Hint: You are recommended to utilize a suitable estimation technique to answer this question].
f) Based on your model from e), proof (using Eviews) that E(ut) = 0
g) Based on your model from e), proof (using Eviews) that Cov (ut, xt) = 0
h) Based on your model from e), are the residuals normally distributed?
i) Based on your model from e), are the residuals free from autocorrelation problem? [Hint: use the Breusch-Godfrey test with 12 lags of the residuals]
j) Based on your model from e), are the residuals free from heteroskedasticity problem? [Hint: use the White test]
k) Based on your analysis of the previous questions, propose a good model [a model that fulfil all five assumptions of the disturbance terms].
Data:
https://docs.google.com/spreadsheets/d/1E6LeNiwaLuyf9hBztdS9cymkItsFKHqEnsNC0Z38J-A/edit?usp=sharing
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started