For this assignment you are required to select three related financial time series and model the returns correcting for volatility assuming a GARCH (1,1) specification is correct (which needs to be tested).

Financial time series

The Task Your task is to model volatility in returns using univariate financial data. You are required to select three related financial time series and model the returns correcting for volatility assuming a GARCH (1,1) specification is correct (which needs to be tested). Your data should include a reasonable set of observations (the more the better) and cover a number of recent years (you are advised to use daily, weekly or monthly data). In carrying out your task you should consider the following questions: · Is each series stationary? Make any necessary transformation to the data based on your observations (you will need to use graphs and correlograms (which can be reported in an appendix)) and Dickey-Fuller tests.

Financial time series

· Is a GARCH(1,1) appropriate or are there any other GARCH type specifications that may be more appropriate? · Is each model correctly specified? (You will need to use standard specification tests and make any necessary corrections if warranted). You are also required to: · Interpret the estimated coefficients in the mean and variance equations and estimate the long run unconditional variance and the annualized volatility. Requirements · Your assignment should be word processed and set out in a formal professional manner and should include: a) An introduction that includes a brief description of the modelling technique adopted stating why it is appropriate.

Financial time series

b) A brief description of the data employed in the analysis (e.g. their source, frequency, mean and standard deviation, the sample period etc.). (10 marks) c) A description of any testing procedure(s) adopted. (25 marks) d) A discussion and interpretation of your results. How do they compare to the results found in the literature? (30 marks) e) A conclusion that includes a statement on which specification performs ‘best’. . (15 marks) All statistical tests undertaken and estimated equations should be appropriately reported in table form with standard errors beneath the relevant coefficient estimate together with any diagnostic statistic you think relevant.

Financial time series

10 marks for this assignment will be awarded for the presentation of your written work including the bibliography/reference section. Cutting and pasting of Eviews output is not acceptable in the main text but Eviews output can be included in the appendix. Note · The word limit: is 2,250-2,500 (you are allowed a 10% variation in your word count which means an absolute maximum of 2,750 words excluding appendices and bibliography/references) · You must also state any data transformations you have employed. https://youtu.be/j22tLUQQDh4

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