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