Analysis of Financial Time Series, Third Edition

Appendix C: Some SCA Commands

The following SCA commands are used in the analysis of Example 8.6:

input x1,x2. file ‘m-gs1n3-5301.txt’  % Load data

 --

r1=ln(x1)  % Take log transformation

 --

r2=ln(x2)

 --

miden r1,r2. no ccm. arfits 1 to 8.

 -- % Denote the model by v21.

mtsm v21. series r1,r2. model (i-p1*b-p2*b**2)series= @

c+(i-t1*b)noise.

 --

mestim v21.   % Initial estimation

 --

p1(2,1)=0     % Set zero constraints

 --

cp1(2,1)=1

 --

p2(2,1)=0

 --

cp2(2,1)=1

 --

p2(2,2)=0

 --

cp2(2,2)=1

 --

t1(2,1)=0

 --

ct1(2,1)=1

 -- % Refine estimation and store residuals

 mestim v21. method exact. hold resi(res1,res2)

 --

miden res1,res2.

Exercises

8.1 Consider the monthly log stock returns, in percentages and including dividends, of Merck & Company, Johnson & Johnson, General Electric, General Motors, Ford Motor Company, and value-weighted index from January 1960 to December 2008; see the file m-mrk2vw.txt.

a. Compute the sample mean, covariance matrix, and correlation matrix of the data.

b. Test the hypothesis , where is the lag-i cross-correlation matrix of the data. Draw conclusions based on the 5% significance level.

c. Is there any lead–lag relationship among the six return series?

8.2 The Federal Reserve Bank of St. Louis publishes selected interest rates and U.S. financial ...