The relationship between the United States and Australian stock markets

The relationship between the United States and Australian stock markets

You will prepare a business style report based on the questions given below.

 

You should format the econometric analysis of these two questions similarly to the answers I provided to the tutorial questions and attach them as appendices to the business report. The data required for the assignment is given in the data file Assignment2015s2.xls. You must submit the assignment to turnitin via the blackboard.

 

Feedback will be provided to students through sample answers provided on MyRMIT studies.

 

Students who want personalised feedback need to provide a hardcopy to the me via the assignment dropin box on level 7 or in person.

 

The assignment consists of two parts; a report and a technical appendix containing estimation outputs and statistical tests. The nature of the technical appendix means that there may be a high degree of similarity, around 60-70%, but the report should have a low degree of similarity.

 

This should be a business type report, not in the style of an academic paper. Your business report must be written professionally and be well presented and explained. On reading the report I need to understand what you did, what the conclusions are and a reasonable evaluation. The quality of presentation, layout and the writing must be of a very high standard. The report should be no more than 1000 words.

 

The technical appendices must be laid out somewhat like my tutorial answers – I have to be able to easily follow your train of thought and your logic. The presentation and the effort must be just sufficient to be understood easily but no more.

 

If these criteria are not met you will lose marks, not only from the marks explicitly allocated to presentation but from the main body of your report. If I don’t understand it I will not mark it.

 

Question 1 – What is the relationship between the United States and Australian stock markets?

 

For this question you will try and determine what relationship, in any, exists between these markets and develop a model which describes it, or alternatively you model may show no relationship exists.

 

  • On the sheet called Quarterly in the data file assignment 2015s2.xls there is quarterly data on the Australian-US dollar exchange rate, the Dow-Jones Industrial Index and the Australian All Ordinaries Index for the past 30 years. The data has been sourced from Thompson Reuters DataStream.

 

Choose what you believe should be the dependant variable and what the explanatory variable(s). Briefly justify your answer.

 

  • Using your choice of variables, design and estimate a model which best describes the relationship between the United States and Australian markets. Your model should be free of error problems as far as possible.

 

  • Evaluate your model, discussing what sort of relationship exists, if any. You should also comment of the reliability of your results.

 

 

Question 2 – What is the impact of volatility in the US market on the Australian market?

 

For this question you will try and determine what relationship, in any, exists between the volatility in these markets and develop a model which describes it, or alternatively you model may show no relationship exists.

 

  • On the sheet called Daily in the data file assignment spring 2012.xls there is daily data on the Australian-US dollar exchange rate, the Dow-Jones Industrial Index and the Australian All Ordinaries Index for the past 5 years. To answer this question you may need to estimate more than one equation. Write down all the equations you intend to use in your model and briefly explain their purpose. You should also state what data transformations you are using and what their purpose is.

 

  • Using your choice of equations, estimate a model which best describes the relationship between the volatility of United States and Australian markets. Your model should be free of error problems as far as possible.

 

  • Evaluate your model, discussing what sort of relationship exists, if any. You should also comment of the reliability of your results.

 

An example assignment report is provided in Module 11 on the blackboard.

 

Mark Allocation

 

Question 1 – 7 marks

Question 2 – 7 marks

Report – 4 marks

Presentation – 2 marks

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