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Download this file and rename it to follow the naming convention LastNameFirstInitialAssig10. For example, if John Smith were submitting an exam, it…

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Assignment 10

FIN 690

This assignment must be submitted as a single Microsoft Word docx file through the assignment link in this module.  Download this file and rename it to follow the naming convention LastNameFirstInitialAssig10.docx.  For example, if John Smith were submitting an exam, it would be named SmithJAssig10.docx.

General requirements for all assignments

  • You must use Eviews to complete the assignment.  The Eviews output must be copy-pasted into your assignment.
  • Work done in Excel is not acceptable.
  • You must use the equation editor to write any equations which may be required in your submission.  Equations written in plain text are not acceptable.
  • You must provide explanatory material interwoven with whatevertables, equations and/or graphs are needed.
  • Place your work in the designated locations.

The task is to produce forecasts of the Dow Jones Industrial Average (DJIA) and the Standard and Poors 500 Stock Price Index (S&P) for the two years following the most recent observation.  You may use any method(s) presented in this course.

Q10.1

Download the historical data for each series form January 1, 1990 to the most recent available observation from FRED and import them into Eviews.  Place Eviews graphs of each series here.

Q10.2

What time period of data will you use for your forecast?  Why? Place your answer here.

I have selected a five year time period. Less than five years is detrimental to accuracy evaluation and more than five years creates bias from the data set.

Q10.3

Which method(s) did you choose? Why?  Place your answer here.

I choose a ARMA(5,5) model. This model provides a careful description of a

Stationary stochastic process and is ideal for a series of unobserved shocks.

Q10.4

Copy-paste the statistical results of your model estimation in Eviews here.

Q10.5

Copy-paste graphs showing the historical values of the series and the projected future values here.

 
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