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Financial Econometrics - Assignment Example

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This series shows an upward trend. This implies that this variable has an upward trend across the years. This data is non-stationary since it is increasing with the change of time.
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Financial Econometrics
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Download file to see previous pages Thus, the series has a significant autocorrelations across the years. However, compared to other years, lag 1, 5, 11 and 31 have larger partial autocorrelations.
The above plot represents the difference in log of real personal disposable income. This data shows a stationary trend whereby the data points assume a straight line. Moreover, the graph shows that the data have a constant mean and variance. This implies that the first difference of the series achieves stationarity.
The above graph represents the autocorrelations of DLrpdi series whereby all the years show significance autocorrelations. However, compared to other years, year 4 and year 10 have larger autocorrelations due to large variations.
The above graph is a representation of the log of real personal consumption data over time. This series shows an upward trend. This implies that this variable has an upward trend across the years. This data is non-stationary since it is increasing with the change of time.
The graph above shows autocorrelation of Lrc. ACF is significant across the years. At lag 1 it is quite high and it has a decreasing uniform trend across the years; implying that the data is not stationary.
The above graph represents the partial autocorrelation of Lrc series whereby all the years show significance autocorrelations. However, compared to other years, year1, year 3 and year 4 have larger autocorrelations due to large variations.
The above plot represents the difference in log of real personal consumption. This data shows a stationary trend whereby the data points assume a straight line. Moreover, the graph shows that the data has a constant mean and variance. This implies that the first difference of the series achieve stationarity.
Therefore, since the p-values at lag 0 and lag 1 is less than 0.05 in the above tests, we fail to accept the null hypothesis which states that the difference in the Lrpdi and Lrc show a unit root; the difference does ...Download file to see next pagesRead More
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