Assignment Task
Question
(a) Write down an MA(2) model.
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(c) The dataset assignment JNJ.csv contains only one variable: JNJ, which is the daily stock price of the JohnsonJohnson Co. Read the data into R and obtain the continuously compounded returns (in % by ×100). Construct one line plot and one histogram with appropriate labels and title. In addition, make some comments on these two graphs.
(d) Discuss the efficient market hypothesis (EMH) in detail. Is the return series consistent with the EMH?
(e) Is it reasonable to fit the MA(2) model in (a) to the daily returns of JNJ stock? Explain why or why not (you are not required to fit the model at this stage).
(f) Estimate the MA(2) model and report the estimated model, is it reason able to fit the MA(2) model? Explain why or why not.
(g) If we wish to improve the model, provide two possible models and give the reason why you think these two models are reasonable.
(h) Estimate the two models you suggest in (g) and write down the estimated models.
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