ECMT6006 Applied Financial Econometrics Semester 1, 2024
Assignment 3
Due: 11.59PM Sunday 5 May 2024
Academic Honesty
Academic honesty is a core value of the University, and all students are required to act honestly,
ethically and with integrity. The consequences of engaging in plagiarism and academic dishonesty,
along with the process by which they are determined and applied, are set out in the Academic
Honesty in Coursework Policy 2015. Under the same policy, as the unit coordinator, I must report
any suspected plagiarism or academic dishonesty.
Instructions
• This is a group/individual assignment which counts for 10% of your final grade. You
can either submit the assignment jointly with a group mate (maximum size of group
is two) or submit the assignment individually. You are encouraged to work in groups.
– If you choose to complete the assignment individually, then the way to submit
your assignment is the same as for Assignment 2. Please indicate clearly on top
of the front page of your submission that this is an individual submission.
– If you complete the assignment in a group, then only one of the group members
needs to submit the assignment on Canvas. The same mark will be given to both
people in one group. Please indicate clearly on top of the front page of your
submission the names and SIDs of the group members.
• You can either hand-write or type your answers, but please compile all your answers
in one PDF file and submit it via a file upload on Canvas. You can only submit your
work once, so please double check before you submit. The page limit of the submission
is 30 pages including appendix (penalty will apply if the page limit is exceeded).
• There are 7 questions in this assignment. Please answer all questions. Suggested
olution to each question will be published on May 16, ten days after the assignment is
due.
• I will randomly select 5 questions (same 5 questions for everyone) to mark, and each
question is worth 5 points. The total mark of this assignment is 25. The marking will
be based on the completion and general quality of your submission.
– For the analytical questions, please show your derivations. Answers without in-
termediate steps will be considered as incomplete.
– For the programming/empirical questions, please feel free to use any statistical
software to answer them. Make sure you present the required results, including
figures, and provide your interpretations if asked. If you use MATLAB live script,
you can present your answers in a document (exported from the live script) which
contains your code, output, and your explanations in texts. If you use separate
code, then please attach your code in an appendix at the end of your submitted
PDF file.
1
• Based on the University late policy, a late submission is subject to a penalty of 5% (of
the total points) per calendar day; and work submitted more than 10 days after the
due date will receive a mark of zero.
• Patton (2019) refers to the reference textbook by Andrew Patton.
Questions
1. Question 2 in Section 4.8.3 of Patton (2019, pp. 139–140).1
2. Question 1 in Section 5.10.2 of Patton (2019, p. 185).
3. Question 2 in Section 5.10.2 of Patton (2019, p. 185).
4. Question 3 in Section 5.10.2 of Patton (2019, p. 185).
5. Question 1 in Section 5.10.3 of Patton (2019, P. 187).2
6. Question 3 in Section 5.10.3 of Patton (2019, pp. 187–188).3
7. Question 4 in Section 5.10.3 of Patton (2019, p. 188).
1This is a programming question. If you don’t use MATLAB to program, then you do not need to follow
the instructions in the question exactly. However, you are still expected to submit your code for writing a
function of the normal log-likelihood and finding the MLE.
2The S&P500 index daily close prices are downloaded from Yahoo Finance, https://au.finance.yahoo
.com/quote/%5EGSPC/history?p=%5EGSPC.
3The annualized standard deviation in Part (c) can be computed as
√
252× daily standard deviation,
because there are normally 252 trading days in a year.