(i) In Example 11.4, it may be that the expected value of the return at time t,...
Question:
return, = (0 + (1 returnt-1 + (2 return2t-1 + u,;
report the results in standard form.
(ii) State and test the null hypothesis that E(returnt|returnt-1) does not depend on return, v (There are two restrictions to test here.) What do you conclude?
(iii) Drop return2t-1 from the model, but add the interaction term returnt-1 ( returnt-2. Now test the efficient markets hypothesis.
(iv) What do you conclude about predicting weekly stock returns based on past stock returns?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Introductory Econometrics A Modern Approach
ISBN: 978-0324660548
4th edition
Authors: Jeffrey M. Wooldridge
Question Posted: