MAF759 - QUANTITATIVE METHODS FOR FINANCE
Trimester 1, 2016
MAJOR ASSIGNMENT
Due date: 11th May 2016
• An electronic copy of the assignment has to be uploaded via CloudDeakin Drop box by 11th May 2016. It has to contain two files: one Word file, and one Excel file containing all data, calculations and pertinent workings, please using the following files names:
MAF759_word;
MAF759_excel;
• If you experience any problem in uploading the document, please contact the CloudDeakin help line on 1800 721 720 or go to the website at: http://www.deakin.edu.au/its/servicedesk/
• Late assignment submissions will NOT be accepted.
You are analysing stocks traded in NASDAQ (National Association of Securities Dealers
Automated Quotations). You have been provided the monthly adjusted close price for
NASDAQ Composite (^IXIC) index, Intel Corporation (INTC), and Microsoft Corporation (MSFT) for the period of January 2000 – December 2015.
Note: Data available via Resources – Assignment 2016 folder
Please complete the following questions:
1. Calculate monthly discrete returns (hint: holding period returns) for the NASDAQ index, Intel Corporation (INTC) and Microsoft Corporation (MSFT) stocks prices, respectively.
2. Which one has the highest risk among the monthly NASDAQ index returns, INTC stock returns and MSFT stock returns? Provide evidences.
3. Are the distributions of monthly INTC returns and NASDAQ index returns different? Are the distributions of monthly INTC returns and MSFT returns different? Provide evidences.
4. Test whether the mean returns of NASDAQ index is significantly different from zero at the 1% level of significance.
5. Calculate the correlation coefficient between the Microsoft Corporation stock returns and Intel Corporation stock returns. Is the correlation coefficient statistically significant at the 5% level?
6. In order to predict the monthly Intel Corporation (INTC) returns, your supervisor advised two simple linear regression models:
Model A: Assuming a linear relationship between monthly INTC returns and NASDAQ index returns.
Model B: Assuming a linear relationship between monthly INTC returns and MSFT returns.
6.1: By using both models, predict INTC returns when NASDAQ index return being
1.5%, and when MSFT return being 0.75%, respectively.
6.2: Which model you would recommend to your supervisor, and why?
MARK SHEET
Questions Marks assigned Marks obtained
1 3
2 4
3 4
4 4
5 4
6 8
Presentation 3
Total 30