Question
For this questions, download daily prices for the NASDAQ Composite (^IXIC) from 1/31/1990 until 10/30/2020. For each trading day and using Microsoft Excel, compute the
For this questions, download daily prices for the NASDAQ Composite (^IXIC) from 1/31/1990 until 10/30/2020. For each trading day and using Microsoft Excel, compute the daily returns of the index. Then generate a time-varying volatility series using the following methods that we developed in class:
- 20-day moving average
- EWMA model using a value for lambda of 0.94
- GARCH(1,1) model using a long-run volatility of 20.83% per year, alpha coefficient of 0.0959 and beta coefficient of 0.8907
Generate a plot of all series in the same graph using annualized values, i.e. multiply the values by the square-root of 252. Please comment briefly on the differences between the methods used to estimate the volatility of NASDAQ returns. Create a report in Microsoft Word, save as pdf and then upload to Blackboard.
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