Is there a friday effect on the daily simple returns

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Reference no: EM131224682

As demonstrated by the prior exercise, daily returns of equal-weighted index have some weekday effects. How about daily returns of S&P composite index? To answer this question, consider the daily returns of S&P composite index from January 3, 2000 to December 31, 2003. The data are in the file d-dell3dx0003.txt, which has 12 columns. The first four columns are daily simple returns of Dell, vw, ew, and sp. Columns 5-9 are indicators for Monday to Friday, respectively. Columns 10-12 are year, month, and day. There are 1004 data points. Perform all tests using the 5% significance level, and answer the following questions:

(a) Is there a Friday effect on the daily simple returns of S&P composite index? You may employ a simple linear regression model to answer this question. Estimate the model and test the hypothesis that there is no Friday effect. Draw your conclusion.

(b) Check the residual serial correlations using Q(12) statistic. Are there any significant serial correlations in the residuals?

Reference no: EM131224682

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