logo Use SA10RAM to get 10%* Discount.
Order Now logo
67 Times Downloaded

Ask This Question To Be Solved By Our ExpertsGet A+ Grade Solution Guaranteed

expert
Liam PattersonEnglish
(5/5)

770 Answers

Hire Me
expert
Jyanat KhuranaComputer science
(5/5)

546 Answers

Hire Me
expert
Doll JuttHistory
(5/5)

795 Answers

Hire Me
expert
Arman KhanPsychology
(5/5)

677 Answers

Hire Me
STATA
(5/5)

Identify whether systematic risk factors are important determinants of Oil and Gas sector stocks

INSTRUCTIONS TO CANDIDATES
ANSWER ALL QUESTIONS

Instructions:

To solve the following questions, please download the excel file “Data” from LMS. In “Data” excel file, there are a total of 8 (eight) sheets.

 

Question 1: (To be performed in Stata) (Marks: 30)

Identify whether systematic risk factors are important determinants of Oil and Gas sector stocks or if it’s the firm specific information which is more relevant (briefly explain the results in the do file)? You can investigate this by employing the following regression specifications:

𝑅𝑒𝑑 = π‘Žπ‘™π‘β„Žπ‘Ž + 𝐡1 ∗ 𝑀𝑅 − 𝑅𝐹 + 𝐡2 ∗ π΅π‘’π‘‘π‘Ž + 𝐡3 ∗ 𝑂𝑖𝑙_𝑅𝑒𝑑 + 𝐡4 ∗ 𝑂𝑖𝑙_π‘‰π‘œπ‘™ + πΈπ‘Ÿπ‘Ÿπ‘œπ‘Ÿ

𝑅𝑒𝑑 = π‘Žπ‘™π‘β„Žπ‘Ž + 𝐡1 ∗ 𝑀𝑅 − 𝑅𝐹 + 𝐡2 ∗ 𝑆𝑀𝐡 + 𝐡3 ∗ 𝐻𝑀𝐿 + 𝐡4 ∗ π΅π‘’π‘‘π‘Ž + 𝐡5 ∗ 𝑀𝑉 + 𝐡6

∗ 𝐡𝑇𝑃𝑉 + 𝐡7 ∗ 𝑂𝑖𝑙_𝑅𝑒𝑑 + 𝐡8 ∗ 𝑂𝑖𝑙_π‘‰π‘œπ‘™ + πΈπ‘Ÿπ‘Ÿπ‘œπ‘Ÿ

𝑅𝑒𝑑 = π‘Žπ‘™π‘β„Žπ‘Ž + 𝐡1 ∗ 𝑀𝑅 − 𝑅𝐹 + 𝐡2 ∗ 𝑆𝑀𝐡 + 𝐡3 ∗ 𝐻𝑀𝐿 + 𝐡4 ∗ π‘Šπ‘€πΏ + 𝐡5 ∗ π΅π‘’π‘‘π‘Ž + 𝐡6

∗ 𝑀𝑉 + 𝐡7 ∗ 𝐡𝑇𝑃𝑉 + 𝐡8 ∗ 𝑃𝑅12 + 𝐡9 ∗ 𝑂𝑖𝑙_𝑅𝑒𝑑 + 𝐡10 ∗ 𝑂𝑖𝑙_π‘‰π‘œπ‘™ + πΈπ‘Ÿπ‘Ÿπ‘œπ‘Ÿ

𝑅𝑒𝑑 = π‘Žπ‘™π‘β„Žπ‘Ž + 𝐡1 ∗ 𝑀𝑅 − 𝑅𝐹 + 𝐡2 ∗ 𝑆𝑀𝐡 + 𝐡3 ∗ 𝐻𝑀𝐿 + 𝐡4 ∗ 𝐢𝑀𝐴 + 𝐡5 ∗ π‘…π‘€π‘Š + 𝐡6 ∗ π΅π‘’π‘‘π‘Ž

+ 𝐡7 ∗ 𝑀𝑉 + 𝐡8 ∗ 𝐡𝑇𝑃𝑉 + 𝐡9 ∗ 𝐼𝑁𝑉 + 𝐡10 ∗ 𝑃𝑅𝐹 + 𝐡11 ∗ 𝑂𝑖𝑙_𝑅𝑒𝑑 + 𝐡12 ∗

𝑂𝑖𝑙_π‘‰π‘œπ‘™ + πΈπ‘Ÿπ‘Ÿπ‘œπ‘Ÿ

𝑅𝑒𝑑 = π‘Žπ‘™π‘β„Žπ‘Ž + 𝐡1 ∗ 𝑀𝑅 − 𝑅𝐹 + 𝐡2 ∗ 𝑆𝑀𝐡 + 𝐡3 ∗ 𝐻𝑀𝐿 + 𝐡4 ∗ 𝐢𝑀𝐴 + 𝐡5 ∗ π‘…π‘€π‘Š + 𝐡6

∗ π‘Šπ‘€πΏ + 𝐡7 ∗ π΅π‘’π‘‘π‘Ž + 𝐡8 ∗ 𝑀𝑉 + 𝐡9 ∗ 𝐡𝑇𝑃𝑉 + 𝐡10 ∗ 𝐼𝑁𝑉 + 𝐡11 ∗ 𝑃𝑅𝐹 + 𝐡12

∗ 𝑃𝑅12 + 𝐡13 ∗ 𝑂𝑖𝑙_𝑅𝑒𝑑 + 𝐡14 ∗ 𝑂𝑖𝑙_π‘‰π‘œπ‘™ + πΈπ‘Ÿπ‘Ÿπ‘œπ‘Ÿ

Where:

Ret = Oil specific stock returns of firms i. MR-RF = Oil Specific Market Excess Returns

SMB = Oil Specific Size Factor (Small minus Big) HML = Oil Specific value Factor (High minus Low)

WML = Oil Specific Momentum Factor (Winners Minus Losers)

CMA = Oil Specific Investment Factor (Conservative minus Aggressive) RMW = Oil Specific Profitability Factor (Robust minus Weak)

Beta = Firm specific beta (Use past 3 years of data. It is calculated by regression the firms returns on market factor.)

MV = Firm specific market capitalization (in Millions)

Page 1 of 2

 

BTPV = Firm specific book to price value

PR12 = Firm specific Average of past 11 months returns (i.e. 2 – 12)

INV = Firm specific investment (calculated by taking change in total assets) PRF = Firm specific operating profit margin

Oil_Ret = Crude Oil returns

Oil_Vol = Standard Deviation of past 36 months crude oil returns.

(Following also needs to be done to solve the question in do file:)

 

1) Clean the dataset, reshape it, and making panel

2) Apply winsorization, outliers,

3) Calculate rolling beta by taking first 36 months & standard deviation by running this regression ret = alpha + 𝐡1 ∗ 𝑀𝑅 – 𝑅𝐹 + error

4) Apply fixed effect regressions

 

Note: All work needs to be done in STATA do file. Furthermore, provide precise explanation in the do file.

 

Question 2: (To be performed in R) (Marks: 20) Using the factors and Crude oil data, estimate summary statistics and correlation table in R. Also, plot the data using ggplot2 library in R. Briefly explain the results in the script file.

Note: All work needs to be done in R Script file.

 

Submission Guidelines:

1. You are required to submit STATA do file and R script file only. It is your responsibility to make sure that both files run smoothly and there are no errors in both files. I have the excel file. I will run your code files on the data.

2. This is a take home exam. So, you can get assistance from books, internet and any other source that may be helpful.

(5/5)
Attachments:

Expert's Answer

67 Times Downloaded

Related Questions

. The fundamental operations of create, read, update, and delete (CRUD) in either Python or Java

CS 340 Milestone One Guidelines and Rubric  Overview: For this assignment, you will implement the fundamental operations of create, read, update,

. Develop a program to emulate a purchase transaction at a retail store. ThisΒ  program will have two classes, a LineItem class and a Transaction class

Retail Transaction Programming Project  Project Requirements:  Develop a program to emulate a purchase transaction at a retail store. This

. The following program contains five errors. Identify the errors and fix them

7COM1028   Secure Systems Programming   Referral Coursework: Secure

. Accepts the following from a user: Item Name Item Quantity Item Price Allows the user to create a file to store the sales receipt contents

Create a GUI program that:Accepts the following from a user:Item NameItem QuantityItem PriceAllows the user to create a file to store the sales receip

. The final project will encompass developing a web service using a software stack and implementing an industry-standard interface. Regardless of whether you choose to pursue application development goals as a pure developer or as a software engineer

CS 340 Final Project Guidelines and Rubric  Overview The final project will encompass developing a web service using a software stack and impleme

Get Free Quote!

450 Experts Online