In this project you will look at the properties of daily Bitcoin returns (9/19/2019 to 11/5/2021) and weekly Nikkei 225 stock index return (1/8/2010 to 11/5/2021). Write a report (max 1500 words) broken into sections (a) to (e) below. Note that it is up to you to decide how much discussion to provide for each section and they are not necessarily equally weighted, you will be marked overall on the clarity and explanation and use of relevant techniques. Please also make a do-file which contains all the code to any tables graphs or results from Stata and attach this at the end of the report.
- For both series plot the graphs- comment on the properties of each series visible from the graph and briefly explain the overall differences between both series.
- Plot the sample autocorrelation function and comment on the properties of both series and the differences between them. [You are expected to use statistical tests using the sample correlations to summarise these properties.]
- For both series find your preferred ARMA model for each, explaining your justification for such a model.
- Using your preferred series for each from (c) find your preferred GARCH type volatility model, explaining why you selected each model.
- Find the forecasts for the conditional volatility for the next 5 weeks ahead for both models. Also find the historical conditional volatility. Plot both on a graph and compare and contrast the conditional volatility estimates and forecasts for both series.