SCHOOL OF ECONOMICS, FINANCE & MARKETING

ECON 1272 - BASIC ECONOMETRICS

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This group assignment is worth 50% of your overall grade and is broken down into three parts.
Each part will be marked out of 30. The first part is worth 10% while the second and third
parts are worth 20% each. Students are to form groups consisting of no less than 3 students
and no more than 5 students. Full marks will be awarded if the assignments are completed
to a satisfactory standard. Each group is to submit a soft copy through Turnitin, by
11:59pm on the day of submission. All submissions of assignments must be accompanied
by an assignment cover sheet that details the names and student ID numbers of the members
of the group. Work on computer disks will not be accessed. Permission to submit
assignments by email will not be granted under any circumstances.

Marks will be deducted if:

Submissions from one group have clearly been plagiarised from another group, with only
minor changes in wording or formatting,
Assignments are incomplete,
The assignment was submitted after the due date without adequate reason, or
The work is of a very poor standard; that is, the standard econometric techniques taught in
the course have not been used.

In these assignments, you will look at two case studies. The first case study looks at the
determinants of the Australian dollar exchange rate using the monetary approach to exchange
rate determination. In the second, the effect of the Global Financial Crisis on the shares of
Apple Inc. is analysed. When working through these case studies, you should not ignore
information you have found in previous tutorials.

For the questions that follow, you may use either Excel or EViews. It is recommended that you
become familiar with both programs as you will find that each program does some things more
easily than the other. However, as you progress through your assignment, you should try to
become more proficient in the use of EViews.

Note: When you are asked to calculate the returns, or take the natural logarithms of the
variables, do NOT print them all out and include them in your submission. The graphs
and calculations you produce are sufficient.
 SCHOOL OF ECONOMICS, FINANCE & MARKETING

ECON 1272 - BASIC ECONOMETRICS

CASE STUDY TWO

In this Case Study, you will be looking at the effect of the Global Financial Crisis (GFC) and the
Great Recession on Apple stock. In the file called Apple Inc.xls, there is monthly data from
June, 2001 to June, 2016, on the share price of Apple stock and the Dow Jones Industrials.
You will be looking at a number of important dates: December 2007, when the GFC and the
Great Recession had officially begun, September, 2008, when the US Government allowed
Lehman Brothers, an Investment Bank, to go bankrupt, and June, 2009, when the National
Bureau of Economic Research (NBER) declared that the Great Recession had ended.

(a) Obtain line graphs for both the share price of Apple stock and the Dow Jones Industrial
average, over the whole period and comment on any similarities or differences between
them. (2 marks)

(b) Calculate the continuous returns on both indices. Obtain histograms and descriptive
statistics up to, and including the November 2007, and then from December 2007 onwards.
Comment on any similarities or differences between them. (2 marks)

(c) For the Apple stock, calculate the 95% confidence intervals for the mean return over the
two periods given in part (b). Use the critical t-values from the following website:
https://www.easycalculation.com/statistics/t-distribution-critical-value-table.php (4 marks)

(d) Assume that the returns on the Apple stock has a normal distribution. Using the means and
standard deviations previously calculated for each of the two periods, find the probability of
getting a negative return on a day selected at random. (4 marks)

(e) Write some brief notes, in point form, describing your results for Case Study Two. Be sure
to report any conclusions that you have made, and submit these. You will use them in a
later tutorial when you write your final report. (2 marks)

Bachelor of Business 2
ECON1272 Basic Econometrics