Write the syntax of commands that you are supposed to write in the STATA do file in an accurate order.

INSTRUCTIONS TO CANDIDATES

ANSWER ALL QUESTIONS

This assignment should be completed by using Microsoft Word. There are 4 parts in this assignment. Part 1 requires you to write the syntax of command that you would need to write in a STATA do file for the data used in this assignment in an accurate order. Part 2 requires Exploratory Data analysis, Part 3 requires Descriptive Measures analysis, and Part 4 requires Inferential Statistics analysis using the outputs from the STATA. The answers for Parts 2, 3 and 4 should be presented in the WORD Document format.

The Word document file containing answers for Parts 1, 2, 3, and 4 should be submitted follow the link provided on the FIN4150 module page on My Learning.

Part 1: Create STATA Data file                                                  (10 marks in total) 

1.1.    This coursework uses the MS Excel data file ('coursework 1 data.xls' File) from ‘My Learning – FIN4150 Module Page in Individual Coursework Assessment 1 folder’. A STATA files are created using the data imported from the MS Excel file.

You would like to determine whether the monthly returns on Microsoft stock can be explained by reference to unexpected changes in a set of macroeconomic and financial variables. There are 250 monthly observations in the excel file, starting in March 1986 and ending in December 2006. Also, there are six series, i.e. the Microsoft stock price (MICRO), the S&P500 index value (SANDP), the consumer price index (CPI), an industrial production index (INDUST), a consumer credit series (CONS), and a credit spread series (SPREAD).

For all  six series, the monthly changes of the data in logarithms were created. The names of the new variables are as follows: 

microreturn (created from MICRO)

marketreturn (created from SANDP)

cpilogchange  (created from CPI)

industlogchange (created from INDUST)

conslogchange (created from CONS)

spreadlogchange (created from SPREAD)

 Required:

Write the syntax of commands that you are supposed to write in the STATA do file in an accurate order.

You do not need to use STATA to do this simply types them in your answer. 

Part 2: Exploratory Data Analysis                     (10 marks each/ 20 marks in total) 

2.1 Below is the time-series plot of the monthly returns of Microsoft stock (variable named micro return), created using the STATA data file created under Part 1 of the assignment.

 You are required to discuss/analyze what you observe in the chart/graph.

(Your answer should focus on the trend, centre tendency, and variation of the data) 

2.2. This is the frequency distribution graph for the Microsoft returns variable. You are required to discuss/analyze what you observe in the graph.

Your comments should focus on shapes (skewness, mode), centre, range, outliers of the distribution.

Part 3: Descriptive Measures                               (10 marks each/ 20 marks in total)                                     

3.1 The mean, standard deviation, skewness and kurtosis of Microsoft returns (variable named microreturn) and S&P500 returns (variable named marketreturn) are reported as below. 

What do you conclude about the skewness and kurtosis of the two variables?                                                                       (10 marks/ 5 marks each )

Microsoft returns

Mean                                = ___ .0003307 ________

Standard Deviation        = ___ .1552541 ________

Skewness                       = ___ -1.739003 ________

Kurtosis                         = ___ 8.785954 ________

 S&P500 returns

Mean                              = ___ .0071533 ________

Standard Deviation        = ___ .0438032 ________

Skewness                       = ____ -1.15334 _______

Kurtosis                         = ____ 7.498729 _______

 3.2 STATA provides the following output for the test for normality of Microsoft returns.    

Explain the results of this test.                                                 (10 marks) 

Jarque-Bera normality test results: Chi(2)  = 472.8  p=2.e-103

Attachments:

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