Assessment 1

FIN7C7 Financial Econometrics

Level 7: 10 Credits

Brief - Summative Assessment 1

Econometrics report
Autumn Term 2023

Submission Deadline:
12:00 noon on 13 November 2023
via BlackBoard

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Assessment Brief

What am I required to do in this assignment?

Requirements:
You must use Eviews to complete this assignment. You will submit both the Eviews file and the report. The
report needs to be typed and presentable. The report must address each of the tasks below. Do not restate
the questions in your report. Your report has to be understandable as a stand-alone piece of work without
referring to the Eviews file. You can include the graphs/ tables/ estimation results from Eviews to address the
questions, but do not details the process of how you create them. The process will be visible in the Eviews
file.
In the Eview files, you need to save all the variables created, all the graphs, estimation outputs and hypothesis
test results, with their names clearly identify the questions they address.
Tables, graphs, figures, estimation outputs, etc. need to be clearly labelled.

If you do not submit the Eviews file, you will automatically lose 50% mark of all calculation task. Calculation
tasks that are not visible in Eviews will also lose 50% mark automatically.

Tasks:
Download the Excel file Data for assignment.xlsx. Sheet 1 contains historical prices of the S&P500 index, and
the monthly US 3-month T-bill rate obtained from the Federal Reserve Bank of St. Louis. The data is in
monthly frequency. Sheet 2 contains the historical prices of different equity indices. You will be assigned a
specific index to work with. Sheet 3 contains the monthly historical prices of 10 US firms listed on Nasdaq. Out
of these firm, each of you will be assigned a different subset of 6 firms to work with.

1. Compute monthly simple return of S&P500 and of the index assigned to you. Plot the price and simple
return of the two indices on two different graphs. Each graph represents one market, consists of the price and
return of that market index. Using information from the graph, discuss briefly the main features of these time
series and compare between two markets.
(10 marks)
2. Compute the monthly risk-free rate from the US 3-month T-bill rate. Plot the rate on a graph.
(5 marks)
3. Report the descriptive statistics for the simple return of S&P500 and your assigned indices, and the monthly
risk-free rate computed from task 2. Discuss the difference between these three variables based on their
descriptive statistics.
(15 marks)
4. Conduct the ADF test for the price and return on your assigned index, and on the return on S&P500. Report
and discuss the results.
(10 marks)
5. Run the following regression:

Where is the simple return on the index assigned to you and is the lagged simple return on the
S&P500.
a) Report the coefficients and their normal t-statistics and Newey-West t-statistics.
(5 marks)

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b) Conduct the White test for heteroskedasticity. Report and explain the results.
(5 marks)
c) Reflect on the results obtained from a) and b), what can you conclude about the predicting power of the US
stock market performance for the return of your assigned market index? Propose the reasons why the US
stock market does or does not have high predicting power on your assigned index.
(10 marks)
6. Estimate the CAPM for the subset of 6 firms that is assigned to you in sheet 2:

Where is the excess return on firm , and is the excess market return.
a) Report all the alphas and betas and their corresponding t-statistics. Highlight the significant alphas and
betas.
(20 marks)
b) Plot the betas against the average excess returns with the excess returns on the y axis.
(5 marks)
c) Test the hypothesis that the alphas are jointly zero. Report the test statistic and the p-value of the test.
(5 marks)
d) Reflect on the results you obtained from a), b) and c) and your acquired knowledge of the CAPM during the
course, discuss if the CAPM works, or does not work for the subset of Nasdaq stocks that was assigned to
you?
(10 marks)

Is there a size limit?

No

What do I need to do to pass?

Threshold criteria i.e. achievement of the learning outcome at the pass/fail boundary

Be able to use Eviews and carry out the estimation and tests that are required.
Present the correct results
Submit the Eviews file along with the report.

How do I produce high quality work that merits a 70% or above grade?

Being able to use Eviews comfortably for the required tests and models.

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Provide clear explanations in the report regarding data manipulation, chosen tests and
models.
Provide a good interpretation of the Eviews results, and explain the decision taken based on
these econometrics results.
Generate a well structured report which addresses carefully the requirements of the
assignment.
Submit the Eviews file along with the report.

How does assignment relate to what we are doing in the scheduled sessions?

The skills necessary to complete the assignment are practiced and discussed in the
scheduled sessions.

How will I receive formative feedback for this assignment?

Formative feedback can be given once you start the assignment. Formative work needs to
be emailed to me by 6th November 2023.

Assessment Coversheet

Must added with submission

Student name: Module code and

name
Student ID: Assessment type

Course: Date of submission

Assessment title:

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 Word count or equivalents (excluding title page, reference list and appendices):

……words/minutes (delete as appropriate)

Thinking of feedback you received in previous assessments (in current and/or previous
modules), indicate how it has helped you to prepare and write this assignment:

Is there any particular aspect of your work that you would like us to focus our feedback on?

I give my consent for my assignment to be used as an exemplar in future iterations of this module, without
disclosure of my personal details (optional - please tick this box if you give your consent).

I confirm that I have read, understood, and followed the Regent’s policies regarding Academic
Misconduct Regulations and that:

 This assignment is entirely my/our own work unless otherwise acknowledged

 No other sources have been used other than those stated
 I/We have not given a copy or have shown a copy of this assignment to other students
enrolled in this module
 I/We have not previously submitted this work for academic credit, for this or any other
module
 I/We have not fabricated or falsified data.

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Marks and Feedback

How will my assignment be marked?

Your assignment will be marked according to the threshold expectations above and the marking
criteria below. You can use them to evaluate your own work and estimate your grade before you
submit.

Marking Criteria Table

Issue 80% -100% 70%-79% Grade 60%-69% 50%-59% 40-49% 0-39%
Relevance to Assignment’s aims and Clear focus on the Mainly focused on Some of the writing Not relevant attempt to Makes no attempt to
assignment themes are integral to the themes of the the themes of the is focused on the address the themes of address the themes of the
brief assignment. assignment. assignment. themes of the the assignment. assignment.
assignment.
Extent of evaluation Evaluation within Good clear evidence Evaluation Some attempt at Not relevant attempt at No attempt at
assignment rigorous and of evaluation carried reasonably well evaluation within evaluation within evaluation within
appropriate. out within assignment. carried out assignment. assignment assignment

Quality Analytical and clear Good development as Evidence of findings Limited evidence of Lack of Unsubstantiated/invalid
of conclusions well- grounded shown in summary of and conclusions findings and substantiated/valid conclusion, based on
reasonin in theory and literature, arguments based on grounded in conclusions supported conclusion, based on anecdotes and
g showing development of new theory/literature and theory/literature. by the literature and anecdotes and generalisations only.
concepts. beginnings of theory. generalisations only.
synthesis.

Skill at Excellent enabling Clear evidence of Some ability to Some ability to Limited ability to Inability to stimulate/
facilitating pacing and ability to stimulate, stimulate and facilitate discussion stimulate/ facilitate discussion.
discussion summarising of facilitate and facilitate discussion but tendency to miss facilitate discussion.
discussion. summarise or be directive. opportunities.
discussion.
Clarity and Clarity of expression Thoughts and ideas Language mainly Meaning apparent Purpose and meaning Purpose and meaning
quality of written excellent. Consistently clearly expressed. fluent. Grammar and but.... language not of assignment unclear. of assignment unclear.
expression accurate use of grammar and Grammar and spelling mainly always fluent, Language, grammar and Language, grammar and
spelling spelling accurate accurate and language grammar and spelling weak. spelling poor.
professional/academic with fluent fluent. fluent spelling still poor.
writing style.
Understanding of Work shows a well-co- Consistent Demonstrates Attempts a logical Marginal fail to Fails to demonstrate
subject ordinated, grounded and understanding understanding in a and coherent demonstrate understanding of the
reasoned understanding of demonstrated in a style which is understanding of the understanding of the subject/topic area.
topic and its relevance to logical, coherent and logical, coherent and subject area. subject/topic area.
practice lucid manner. flowing.

Regent’s University Generic Descriptors

Conversion Conversion
Band scale for UG scale for PG Generic descriptors
Programmes Programmes
All learning outcomes and task specifications have been achieved to an exceptionally
high standard (according to the level of study).

The outcome of the assessment task is presentable in a professional context and may
extend practical or theoretical knowledge in the field. It displays an exceptionally high
8 90 - 100 90 - 100 level of understanding, evaluation, insight, analysis, reflection and/or criticality (according
to the level of study), and connections are developed both within and beyond the task
set.

The work’s organisation, structure and presentation are developed to an exceptionally

high standard.

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 All learning outcomes and task specifications have been achieved to an outstanding
standard (according to the level of study).

The outcome of the assessment demonstrates an outstanding display of understanding,

7 80 - 89 80 - 89 exploration, evaluation, insight, analysis, reflection, criticality and/or research (according
to the level of study). Connections are developed both within and beyond the task set.

The work’s organisation, structure and presentation are developed to an outstanding

standard.

All learning outcomes and task specifications have been achieved to high standard
(according to the level of study).

The outcome of the assessment demonstrates an excellent display of understanding,

6 70 - 79 70 - 79 exploration, evaluation, insight analysis, reflection, criticality and/or research (according
to the level of study), and connections are developed both within and beyond the task set.

The work’s organisation, structure and presentation may be developed to an excellent

standard.

All learning outcomes have been achieved at a good and some to a very good standard
(according to the level of study).

The outcome of the assessment demonstrates a very good level of understanding,

exploration, evaluation, analysis, reflection, criticality, some insight and/or very good
5 60 - 69 60 - 69 research (according to the level of study), and connections are established within the task
set, and in some cases reaching beyond.

The work’s organisation, structure and presentation may be developed to a very good
standard.
Most learning outcomes have been met at a good standard (according to the level of
study).

The outcome of the assessment demonstrates a good understanding, exploration,

4 50 - 59 55 - 59 evaluation, analysis, and some reflection, criticality and/or appropriate research.
(According to the level of study)

The work’s organisation, structure and presentation may be appropriately developed.

All learning outcomes have been met to a minimum satisfactory standard (according to
the level of study).

The outcome of the assessment shows an adequate understanding, of major ideas, with
little insight and basic research. Limited level of analysis, reflection and/or criticality
(according to the level of study).
3 40 - 49 50 - 54
The outcome of the task shows ability to paraphrase concepts and theories, with limited
ability to make connections.

The work may be disorganised, and the structure and presentation may be barely
adequate.
Most learning outcomes have almost been met, whilst the rest have not (according to the
level of study).

The outcome of the assessment shows a limited understanding of major ideas, with little
2 30 - 39 36 - 49 insight, very basic research, and very limited ability to make connections. No analysis,
reflection and/or criticality (according to the level of study)

The work may be disorganised, and the structure and presentation may be barely
adequate.
The majority of the learning outcomes have not been met (according to the Level). The
outcome of the assessment task is incomplete, flawed, very limited and/or presents
significant inaccuracies.

1 11 – 29 21 – 35 The outcome of the assessment shows very limited understanding with no insight, and
very limited ability to make connections within basic ideas in the field, very fragmented.
Lacks research. No analysis, reflection or criticality (according to the level of study)

The work is disorganised, and unstructured. Presentation is barely adequate.

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 None of the learning outcomes have been met. The task has not been addressed by the
student, or there is no assessable task.

The outcome of the assessment shows no understanding of basic ideas, with no insight
and shows no ability to make connections within basic ideas in the field, or the
0 0 - 10 0 - 20
connections are completely irrelevant. Lacks research. No understanding, analysis,
reflection nor criticality.

The work completely lacks organisation and structure. Presentation is completely

inadequate.

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