/

Extreme Events – Specimen Question A.4.1(a) – Answer/Hints

[this page | pdf | references | back links | custom searches]

Return to Question

 

Q. Estimate the value of c 16 times, the first time assuming that you only have access to the first 5 observations, the next time you only have access to the first 6 observations, etc.

 

In each estimation, the value of c can be estimated as the slope of the best fit line in a standard linear regression (e.g. using the function SLOPE in Microsoft Excel or the MnSlope Nematrian web function). [N.B. Some refinement of this would be needed if the model were the simpler one  since this is equivalent to the constrained regression where the line of best fit is forced to pass through the origin.]

 

Using logged returns, these values of c are:

 

Estimation up to and including period

Estimated value of c

5

-0.3354190

6

-0.4051569

7

-0.3408570

8

-0.3844843

9

0.0505541

10

0.1635878

11

0.1143870

12

-0.0408473

13

0.2354016

14

0.3187719

15

0.3548701

16

0.3061011

17

0.3293394

18

0.3233795

19

0.3163910

20

0.3218388

 


NAVIGATION LINKS
Contents | Prev | Next | Question


Desktop view | Switch to Mobile