You are a trainee analyst for a well-known investment company. Your manager requires you to write a report about the predicted performance for a specific company (Ferguson plc), given its monthly return and a set of macroeconomic variables.
Econometric analysis: a systematic way
Data collection and structuring
Collect data, structure it and make all sample sizes for all variables consistent
Import data to Eviews Import the data from the Excel file and save the resulting work file
Data Descriptive
Describe time series properties for the set of variables using descriptive statistics and correlation
Stationarity
Perform stationarity tests
Do necessary transformation Calculate the following:
1- The log returns for share price (R_share) and for index (R_index). Check their stationarity. If they are not stationary, transform the variables.
2- Generate excess return series for the share and for the index.
ER_share = R_share – monthly average rate (3M TBill rate)
ER_index = R_index – monthly average rate (3M TBill rate)
3- Generate series for Inflation using CPI
inflation = 100*dlog(cpi)
4- Get first difference for each of the independent variables. If it does not work, try to get log() then get first-difference.
