The data used in the question is for the monthly data where the model has been designed to test the calendar effect which is the test for the FTSE All Share Index. For the testing of the misspecifications of the condition mean, error or the autocorrelation, there is a test of the Durbin Watson which has been used for the testing and to identify the autocorrelation method. With this, when it is zero, then it implies that there is a positive autocorrelation and when DW is 4, then there is negative correlation. The effects for the ARCH errors is based on the performance with the selection criteria of the length that is tested. The important outcome is relevant to the lag length selection which is also applicable to the processes that exhibits the effects based on the performance and the vitality clustering.
Installing the PCGive:
Accepting the licence agreement -
Information of the software -
Setting up the installation path -
Installation complete -
Code part of the solution:
The method used in the process is summation using PCGive. The code screenshot has been attached above.
The descriptive statistics screenshot has been attached below. It has been obtained using the code attached above.
The result shows that maximum share price was obtain in 2016, when running average is calculated.
Test of the data:
The procedure used for testing is:
- Importing data in PCGive.
- Running the analysis on the data using PCGive code.
- Obtaining the data and correlating it with previous result.
The test shows that the data obtained previously matches with the output.
The univariate model used for the estimation is linear forecasting, where the previous data trend has been used for forecasting. The procedure is similar to the last step, where LM formula has been implemented on PCGive.
Using the CAPM model, the beta value obtained is 1145. The diagnostic test result has been attached above.
The result obtain is as per the data forecast done in last step, and the previous data available to us. Hence, the model is correct.
The bull market denotes the upward market trend; however, the bear market denotes the downwards market trend.
The beta value obtained in the last part, and the trend obtained, shows that the data for March 2003 is bull market and October 2004 is bear market.