Fin Stats (MSF 502)

Assignment 1: Due September 13

You can work in groups of up to 4 people. Put the name of each group member on the first page, in alphabetical order, by last name. Assignments must be turned in hard copies, not emails. I have uploaded an Excel file of USD to Foreign Currency daily exchange rates for $/AUD Australian Dollar $/CAD Canadian Dollar $/CHF Swiss Franc $/EUR Euro 1. Calculate the daily percent change in dollar exchange rates, and, for each series, estimate the Average daily return [=AVERAGE(series)] Daily volatility (standard deviation) [=STDEV(series)] Skewness [=SKEW(series)] Excess kurtosis [=KURT(series)] Which exchange rate is most volatile? Which exchange rate has the most positive skewness? What does this mean in terms of that currencys value against the dollar? Which exchange rate has the fattest tails? 2. Present a correlation table between all the exchange rates. Do you think the exchange rates are strongly correlated with each other? Explain. Present the autocorrelations [CORREL(et, et-lag)] for lags a 1, 2, 3, 4, 10, and 20 trading days. The t-test of an autocorrelation coefficient is t r , where r is the autocorrelation value and N is 1 r2 the sample size. For large samples (that is N > 300 we can say that if t 1.65 , 1.96 we are 90%, 95% confident that r is statistically different from zero. Are any of the autocorrelations statistically different from zero? 5. For each of the exchange rates construct series of squared daily percent changes in dollar exchange rates. a. b. c. Present the autocorrelations [CORREL( et2 , et2lag )] for lags a 1, 2, 3, 4, 10, and 20 trading days. Any of these autocorrelations significantly different from zero? Comparing your answers from this problem with those in question 4, do you think either dollar exchange rate returns or squared exchange rate returns are easily predicted using past observations?
N 2

3. 4.

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Run QQ Plots of the daily percent changes, with the normal distribution as the benchmark. Do the QQ plots conform to the descriptive statistics in question 1?