(a) Compute the percentage monthly return on equities and dividends. Plot the two returns and interpret their time series patterns.
(b) Estimate an \(\mathrm{AR}(6)\) model of equity returns. Interpret the parameter estimates.
(c) Estimate an \(\mathrm{AR}(6)\) model of equity returns but now augment the model with 6 lags on dividend yields. Perform a test of the information value of dividend yields in understanding equity returns.
(d) Repeat parts (b) and (c) for real dividend yields.
(e) Estimate a MA(3) model of real equity returns.
(f) Estimate a MA(6) model of equity returns.
(g) Perform a test that the parameters on lags 4 to 6 are zero.
(h) Repeat parts (e) to (g) using real dividend yields.