Use the data in VOLAT.RAW for this exercise. The variable rsp500 is the monthly return on the
Question:
rsp500t = (0 + (1 pcipt + (2i3t + u,
(i) What signs do you think (1, and (2 should have?
(ii) Estimate the previous equation by OLS, reporting the results in standard form. Interpret the signs and magnitudes of the coefficients.
(iii) Which of the variables is statistically significant?
(iv) Does your finding from part (iii) imply that the return on the S&P 500 is predictable? Explain.
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i ii The sign of is fairly clearcut as interest rates rise stock returns fall so 0 Higher interest r...View the full answer
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Related Book For 
Introductory Econometrics A Modern Approach
ISBN: 978-0324660548
4th edition
Authors: Jeffrey M. Wooldridge
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