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Assignment_2_Fall_2011 - FIN 271 FALL 2011 Dr R SOYER...

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FIN 271 Dr. R. SOYER FALL 2011 Assignment 2: Nikkei Index During the 1990s international investors have been complaining that the Japanese market has been declining. To investigate the issue 132 daily values of the NIKKEI index during the period of 1/1/91 through 12/1/1991 will be analyzed using the linear trend model: INDEX t , t01 t œ "" % where INDEX is the value of NIKKEI index at noon of day t and t is the time index and 's t t % are zero-mean white-noise terms. The data corresponding to this assignment is given in file "Nikkei.txt", which you can download from Blackboard (under Session 9). Please use an 0.05 in all your analyses. α œ (a) Look at the plot of the data and discuss whether it is reasonable to suspect that there is a downward trend. (b) Estimate the trend model and discuss the statistical significance of the model parameters. Based on your analysis, what can you say about the claim of international investors ?
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