Heteroskedasticity in Linear Regression Models

LM-Stat (for testing join significance of independent variables)

Heteroskedasticity

Other large sample tests: The Lagrange Multiplier Statistics to test join significance of independent variables

Consider the model:

RcPTQi+FYduv4VBIRbVYXFhERIosnzhbQOtEuIWH

Explain the procedure of LM-test to test the null hypothesis that QRqDZCADs=  and  XX9uSGaIiIBbM4iIZgECAwECAwECAwUqILAFBgAo  have no effect on DZorMIjEQgA7  once the other factors have been controlled for.

The null hypothesis: ol5CWEOXnVOqpVWtl02QAGaBfZ4SYwASuaK9S8Ci .

Estimate the restricted model: AkWvkbR5ggAAOw== . Get the residuals XWaIiIBbM4iIZgECAwECAwECAwECAwECAwUmIAAI .

Regress XWaIiIBbM4iIZgECAwECAwECAwECAwECAwUmIAAI  on XX9uSGaIiIBbM4iIZgECAwECAwECAwECAwECAwEC . Get the XX9uSGaIiIBbM4iIZgECAwECAwECAwECAwECAwEC .

Compute QqLTomFqv2NGQEugSMYGC0eTFSrvdRLFjVBsFRdb .  Reject the null  if  QKPIhrVqTFmIlwCVeAgWjqHstAxBHQdE0OJihlGL

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Understanding Investment Returns, Margin, and Portfolio Optimization

Question 2

Consider the three stocks in the following table. Pt represents the price in time t, and Qt represents shares outstanding at time t. Stock C splits two for one in the last period.

P0

Q0

P1

Q1

P2

Q2

A

120

400

135

400

135

400

B

60

800

52.5

800

52.5

800

C

135

800

150

800

75

1600

a. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t = 0 to t = 1).

b. What must happen to the divisor for the price-weighted index in year 2?

c. Calculate the rate of return for the second period

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Portfolio Management and Investment Analysis

Question 2

Consider the three stocks in the following table. Pt represents the price in time t, and Qt represents shares outstanding at time t. Stock C splits two for one in the last period.

P0

Q0

P1

Q1

P2

Q2

A

120

400

135

400

135

400

B

60

800

52.5

800

52.5

800

C

135

800

150

800

75

1600

a. Calculate the rate of return on a price-weighted index of the three stocks for the first period (t = 0 to t = 1).

b. What must happen to the divisor for the price-weighted index in year 2?

c. Calculate the rate of return for the second period

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Understanding Cointegration and Error Correction Models in Eviews

In-Class Exercise 7

Question 1

This question helps to familiarize you with the analysis of cointegration and the error correction model. The dataset we are using is forex.csv, which can be downloaded from Moodle.

Part 1: Using Eviews for Analysis

First, load the file into Eviews. To get a sense of the data over the sampling period, highlight and open the two series spotrate and forwardrate. Then choose View > Graph and click OK.

%IMAGE_1%

Clearly, the two series show some trending behavior, and they

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Analysis of Cointegration and Error Correction Models

In-Class Exercise 7

Question 1

This question helps to familiarize with the analysis of cointegration and error correction models. The dataset we are using is forex.csv, which can be downloaded from Moodle.

Part 1: Using Eviews for Analysis

First, load the file into Eviews. To get a sense of the data over the sampling period, highlight and open the two series spotrate and forwardrate. Then choose View -> Graph and click OK.

%IMAGE_1%

Clearly, the two series show some trending behavior, and they seldom

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Financial Statement Analysis: Ratios & Explanatory Notes

Financial Statement Analysis

Explanatory Notes to Financial Statements

1. What should be done to ensure a valid comparison of two balance sheet items?

The CPI for the previous year’s balance sheet should be applied to make comparisons in real terms over the current year.

2. What is the purpose of the Explanatory Notes to the Financial Statements and when are they most relevant?

The explanatory notes are an essential complement to the financial statements. They provide context and background information,

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