Consider the monthly \(\log\) returns of CRSP equal-weighted index from January 1962 to December 1999 for 456 observations. You may obtain the data from CRSP directly or from the file m-ew6299.txt on the Web.

(a) Build an AR model for the series and check the fitted model.

(b) Build an MA model for the series and check the fitted model.

(c) Compute 1- and 2-step-ahead forecasts of the AR and MA models built in the previous two questions.

(d) Compare the fitted AR and MA models.

Previous two Questions:

1: Consider the monthly Aaa bond yields of the prior problem. Build a time series model for the series.

2: Again, consider the two bond yield series, that is, Aaa and Baa. What is the relationship between the two series? To answer this question, build a time series model using yields of Aaa bonds as the dependent variable and yields of Baa bonds as independent variable.