University of Rennes1

Graduate school of management (IGR-IAE)

2021-2022

M2 Advanced Studies and Research in finance (ASRF)

INTRODUCTION TO ECONOMETRICS/BLOOMBERG

1. Work organization:

Please put your work in the Moodle plateform no later than February 5th 2022.

Your work needs to include these two files:

- File 1: the program file that you have created to analyze your sample.

- File 2: the PdF file in which:

o You explain all the necessary steps that you have followed to analyze your data

o You report the obtained results and interpret them

o Answers need to be written in English

2. Work to do:

1. We collect from the Bloomberg dataset annual data for the year assigned to your group
(please see the attached Excel file) on worldwide banks.

2. Using this dataset, we estimate the following model indicating the determinants of
bank capital structure:

EQTAi = α0 + α1 LnTAi +α2 ROAi + α3 LOTAi + εi , (1)

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 The definition of these variables is as the following:

- EQTA: Ratio of total equity to total assets (%). EQTA is the dependent variable (a
measure of bank capitalization).

- LnTA: Natural logarithm of total assets (Millions of Euros).

- ROA: Return on assets defined as the ratio of net income to total assets (%). ROA is a
measure of bank profitability.

- LOTA: Ratio of net loans to total assets (%).

- εi : The error term.

2.1. Using the software R,

a. Prepare the dataset that you use to estimate this model: provide all the
necessary steps you have followed to achieve that goal (in the PdF and Program
files).

b. Focus on only banks located in the following Western European countries:

Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy,
Norway, Netherlands, Portugal, Sweden, Spain, Switzerland and the United
Kingdom.

c. Describe your sample (number of banks, number of observations, countries on

which you are focusing in your study, check the presence of outliers discuss the
criteria used to clean your data…)

d. Show and analyze the descriptive statistics of your sample.

e. Check the correlations among the explanatory variables

f. What do you expect on the sign of these coefficients: α1 ; α2 ; α3 (for this you
need to read the research paper joined to this project PaperJBF-ExpectedSigns)

g. Estimate the model using OLS and interpret the results.

2.2. Do again the same work using Excel and compare the results with those obtained using R