Estimate an error-correction model

Assignment Help Finance Basics

Reference no: EM132268305

For Finance Group

1. An empirical investigation into the relationship between stock market prices and macroeconomic fundamentals: Tests Based on Cointegration Analysis.

s_t = β₀ + β₁I_t + β₂P_t + β₃m_t + β₄r_t + u_t

where st is the logarithm of the stock market price, It is the logarithm of industrial production, mt is the money supply (Nil or M2) and rt is the
nominal interest rate and ut is the error term.

You can also include the government expenditure and the real exchange rate as additional variables to examine whether they affect the stock market prices. If you find cointegration between the stock market price and macroeconomic fundamentals (industrial production, consumer price index, money supply and nominal interest rate), you can then estimate an error-correction model normalizing on changes in stock market prices.

Test the above model for Saudi Arabia, using monthly data on the variables underlying the model over the period 1995M1-2018M12.

Extract special data for Saudi companies in Saudi riyal for 10 years for Industrial production.

Reference no: EM132268305

Questions Cloud

Discuss the customer network security design : Discuss the customer's network security design with your team. Title your thread with the network you were assigned. Make your argument for the network topology

Speed of circulation of the currency : Using the quantitative theory of money, answer the following question: if the money supply increases by 6%, production increases by 2% and the speed

Engaging in a bumper-sticker advertising campaign : Belvedere, Colorado is engaging in a bumper-sticker advertising campaign. Monthly sales data from ski shops selling the "Don't Worry-Be Happy (in Belvedere)"

How the use cases apply the binary search tree : Find two applications/use cases of the binary search tree and explain how the use cases (Applications) apply the binary search tree.

Estimate an error-correction model : Relationship between stock market prices and macroeconomic fundamentals - Tests Based on Cointegration Analysis

Does the milestone demonstrate the students ability : Does the milestone demonstrate the student's ability to assess cultural groups and traditions within a community or population for enhancing quality of care?

How it is used to model behavior for policy making : Your paper will be an annotated bibliography, specifically focusing on the topic of using simulations for policy making. The papers you select must address how.

Estimates that a new tax on interest income : An economist estimates that a new tax on interest income has had no effect on how much people save. She therefore concludes

Scenario to the concept of excess burden : As a result of you leaving the job, you do not have to pay the $22 tax. Relate this scenario to the concept of excess burden.

User Account

All Pages