ECON2181 Introduction to Financial Econometrics.

ECON2181 Introduction to Financial Econometrics - Durham University

Company - BMO GLB. SMCOS

Using Oxmetrics program

Question 1: Download the monthly data series from DataStream for the period between January 2000 and December 2019 for the following:

the share price from a company that has been randomly assigned to you,

(you will be provided with the name of the company assigned to you in the Assessments` folder in Introduction to Financial Econometrics site on DUO.)
the FTSE All Share Index (proxy for the market portfolio), and
the UK 3 Month Treasury Bill (proxy for the risk-free rate of return).
Note: the UK 3 Month Treasury Bill Interest Rate is given as an annualrate.

Transform prices into log returns, plot the return data, report the sample statistics, and examine whether the log returns are normally distributed.
Carry out a test for stationarity in your company return and the market return. Carefully explain the test procedure and the importance of your results.

Identify an univariate time-series model for the estimation of your company`s return. Comment on the procedure adopted and pay particular attention to the identification, estimation and diagnostic stages of the modelling process.