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The assignment talks about Economics MOD005704 Assignment- Financial Investment Analysis. Therefore, choose the best VAR model using the BIC and AIC criteria and explain your reasoning.

## Economics MOD005704 Assignment- Financial Investment Analysis

1.       You are to download Rolls-Royce share price (Last Price) from January 2000 to December 2019 using monthly data from the Bloomberg terminal. Construct continuously compounded return and then answer the following questions: Firstly,Box-Jenkins methodology involves primarily 3 stages of model building: identification, estimation and diagnostic checking. For the given series, obtain a plot of the log returns and comment on the graph.

(b) Also, Analyse the correlogram structure and comment on the structure of the data. (c)Then,  Express the estimated ARMA(1,1) model in equation form. (d) Also, What is the value of the BIC and AIC for ARMA(1,1) model? (e) Besides,Let us suppose that it is plausible that the model specification can take the form of ARMA(0,0) to ARMA(3,3). Lastly, Use AIC and BIC to identify the best model. Besides, Your outputs should consist of two 4×4 matrices for AIC and BIC. Express the chosen model in equation form. [30 marks]

#### Economics MOD005704 Assignment- Financial Investment Analysis

2.        Assume that the trivariate series of daily exchange rates of Swiss Franc, Canadian dollar and Australian dollar against the British pound follows a VAR model. Download these exchange rates using daily frequency from 03 January 2000 to 31 December 2019 from the Bloomberg terminal. Construct continuously compounded returns series for these exchange rates and perform the following tasks:

(a) Choose the best VAR model using the BIC and AIC criteria and explain your reasoning.

(b) Estimate the final model and write down your fitted model. Examine and interpret some of the interesting characteristics. Find the R2 for your preferred model and interpret.

### Detailed Instructions

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