ES50108 Econometrics for Finance

University of Bath, Department of Economics
ES50108 Econometrics for Finance
Coursework 2019/20
1
Instructions
1. Deadline, Noon on Friday, 12:00. 13 December 2019, week 11.
2. The coursework is worth 30% of your total mark for the course.
3. Answer all 3 questions.
4. All estimation results, graphs etc., should be collected in an Appendix and
clearly referenced in the text (i.e., referring to a table or a graph number in the
Appendix).
5. The analysis of the results is the most important stage of the study. It involves
estimating an initial model or models, performing appropriate diagnostic tests,
reformulating and re-estimating, conducting tests of hypothesis and, finally,
prediction and policy implications. You should consider including a
comparative table of results (in terms of different estimation methods, different
samples and / or variables) – basically whatever you think is appropriate given
the research question you are considering). PLEASE tabulate your results,
simply cutting and pasting EViews output is not acceptable.
6. No points will be awarded for output results without detailed explanations and
careful presentation of arguments.
7. Appropriate notation: numbers should be reported with up to 3 decimal points;
use Word equation editor if typing formulas; use uniform reference formatting
(e.g., Chicago); use at least font size 11.
8. The coursework should be a maximum of 1500 words long. This is the absolute
word limit, i.e. it already includes the customary 10% extra allowance described
in the student handbook. The word limit does not include the Appendix and
References.
9. Each submission must be individually distinct and written in your own words.
10. Submission: the coursework must be submitted both on Moodle and as a hard
copy:
i) Moodle: must be submitted the form of
candidatenumber_ES50108_CW.
ii) Hard copy: must be submitted with cover sheet and appendix (you must
print your cover sheet from SAMIS). Submit the assignment in the
labelled pigeonholes in 3East 3.17.
Good luck!
Imran Shah
University of Bath, Department of Economics
ES50108 Econometrics for Finance
Coursework 2019/20
2
Some General Guidelines and “Warnings”
1. Work individually; the coursework is not a group project! Every year we
identify a number of students who “work together” and they are punished for
their unfair conduct: most of these students end up with 0 mark on their
coursework… Trust us; it is not worth the risk.
2. “Plagiarism as a form of cheating takes place when the student “borrows” or
copies information, data or results from an unacknowledged source, without
quotation marks or any indication that the presenter is the original author or
researcher”. (See, Student Handbook).
3. “Reality check”: if you get a result that you find
strange/unintuitive/implausible, then before drawing the conclusion that you
found something striking or there is something wrong with the data, you are
strongly advised to think carefully and query the econometric/statistic
tool/technique that you employed.
4. “Explain your finding carefully”: when you see this, you should be alarmed:
we are asking something that is not obvious, something that requires you to
think. Usually, a lot of marks are awarded for good explanations. Please note
that the explanation does not have to be long at all; it only needs to be clear and
correct.
5. Do all hypothesis tests properly. For instance, the way you report the
significance of a coefficient reveals how well you understand hypothesis
testing.
6. Do not be sloppy when you interpret coefficients.
7. Do not just cut and paste EViews output into your coursework, create your own
tables to fit your needs.
8. Avoid manual calculations (e.g. F-statistics or Chi-squared for LM test), let
EViews calculate for you: the likelihood of an error is significantly smaller that
way…
9. Read the question carefully! Students often answer questions which are not
asked and do not answer questions which are asked.
University of Bath, Department of Economics
ES50108 Econometrics for Finance
Coursework 2019/20
3
Questions
1. The ‘market model’ of asset returns states that;

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