Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Yahoo! Finance provides data on the stock price at https://finance.yahoo.com. Download the data on the monthly stock prices (close prices) of Visa Inc. (V) and

Yahoo! Finance provides data on the stock price at https://finance.yahoo.com. Download the data on the monthly stock prices (close prices) of Visa Inc. (V) and Mastercard Incorporated (MA) from January 1, 2011 to October 1, 2021.
(a) (5pt) Draw one chart illustrating the historical monthly prices of the two stocks for the whole period (from January 1, 2011 to October 1, 2021).
(b) (15pt) Let the stock prices of Mastercard Incorporated and Visa Inc. be the X and Y values, respectively. Using the data from January 1, 2011 to January 1, 2020, conduct the co-integration procedure. In other words, find the coefficients a and b; calculate the correlation coefficient ρ and the R-square R2; and check whether they have a strong linear relationship.
(c) (20pt) Suppose that you are allowed to take short positions for at most 100 shares of any stock, and that each time you earn a profit, you deposit it into a bank account which gives you a monthly return of 0.25%. Set your own thresholds δ, γ; conduct the pairs trading for the period from February 1, 2020 to October 1, 2021; and report the total profit on October 1, 2021, resulting from your strategy.

Step by Step Solution

3.40 Rating (150 Votes )

There are 3 Steps involved in it

Step: 1

Certainly Lets break down each step of the task into a sequential process Step 1 Data Retrieval First we need to retrieve the monthly stock prices close prices of Visa Inc V and Mastercard Incorporate... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Corporate Finance

Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford

5th Edition

0135811600, 978-0135811603

More Books

Students also viewed these Finance questions

Question

List six objectives an analyst pursues in designing system output.

Answered: 1 week ago

Question

Redemption of debentures for cash will

Answered: 1 week ago