Assignment will count for 30% of your Final Grade
Research Project
Students individually are required to write a 1500 words research project. For this purpose, a data-set is being provided to them. The research project counts for 30% of their final grade.
Project 1
For Project 1, you need to use the Excel file Project 1.xlsx. The file has data on house price index, consumer price index, stock price index, short-term and long-term interest rate (in percentage terms) along with inflation for sixteen OECD countries. The data-set has 100 quarterly observations from 1981:q1 to 2005:q4. You need to choose one of the countries from the set of sixteen countries in the data-set. Your choice of country should not match that of any other student who is enrolled in the course. For example, if one of you is working with Australia, then none of the others can work with Australia. Given the data-set, you need to answer the following:
a) You need to take the natural logarithm of all the variables except the interest rate. Then perform the Augmented Dickey-Fuller unit root test both on levels and first differences of the variables, with an appropriate lag length as selected by the Akaike information criterion, starting with a maximum lag length of nine. Comment on your findings.
b) You need to build a Vector Autoregressive (VAR) model using the following variables: first difference of house price, stock price, interest rate differential (short-term – long-term), and inflation. Please note that you are working with the natural logarithm of house price and stock price. Use either the Akaike or Schwarz Bayesian information criterion to select the appropriate lag length for your VAR model.
c) Given the choice of your VAR model in part b), compute an impulse response and variance decomposition for 16 quarters and comment on your findings. From the estimated model, can you comment on the direction of Granger causality?
Project 2
For Project 2, you need to use the Stata data-set project2.dta. The data consists of weekly data on closing price (labeled as close), treasury bills (labeled as tbills, measured in percentage terms), and volume (labeled as tau, measured as the ratio of the share volume of security j at date t and the total number of shares outstanding of seurity j). Companies are coded as newcode and there are twenty-four companies (labeled as 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24). Please note the number of observations could vary across companies. You need to choose one company from the data-set. Your choice of company should not match that of any other student who is enrolled in the course. For example, if one of you is working with newcode taking the value of 1, then none of the others can work with newcode taking the value of 1. Given the data-set, you need to answer the following:
a) You need to take the natural logarithm of the variable close (call it lnclose). Use Dickey-Fuller tests with appropriate lag length (using the Akaike information criterion) and examine whether lnclose is stationary starting with a maximum lag length of nine. You now take a first-differenced lnclose (call it return). Calculate the descriptive statistics of return and comment.
b) Form a Vector Autoregressive (VAR) model involving return, volume (labeled as tau) and the first difference of tbills. Choose the lag length either using a likelihood ratio test or using the Akaike or Schwarz Bayesian information criterion to select the appropriate lag length for your VAR model, starting with a maximum lag length of nine. Estimate the chosen VAR model and comment on the results obtained.
c) Compute the impulse response functions for 16 weeks and the forecast-error variance decompositions for 16 weeks. Comment on the results obtained. From the estimated VAR model, does volume (tau) cause return or return cause volume (tau)? Use a Granger causality test to answer this and comment.
Project 3
For Project 3, you need to use the Stata data-set Project 3, 4&5.dta. The data is from the last two waves of the British Household Panel Survey: wave 17 and wave 18. The description of the variables is listed in Table 1:
Table 1
Variable Variable Name in the Data File Description of the Variable
Personal identification number Pid
Wave number Wave Either 17 or 18
Household identification number Hid
Number of children in the household nkids Ranges from 0 to 6
Real (1987=100) annual household income Rfihhyr In real GBP
Sex of the respondent male Male =1 , Female =0
Change in financial situation compared to last year fisitcd1, fisitcd2, fisitcd3 fisitcd1: better, fisitcd2: worse
fisitcd3: same
Expectation about the financial situation for a year ahead fisitxd1, fisitxd2, fisitxd3 fisitxd1: better, fisitxd2: worse
fisitxd3: same
Whether the respondent saves from current income Save Save: 1 = yes, 0 = No
Marital status mastatd1,mastatd2,
mastatd3,mastatd4,
mastatd5,mastatd6, mastatd1: Married, mastatd2: Living as Couple, mastatd3: Widowed, mastatd4: Divorced, mastatd5: Separated, mastatd6: Single
Educational status neduc, ueduc, oheduc, aeduc, oeduc, poeduc neduc: 1, no formal educational qualification, ueduc: 1, University degree, oheduc: 1, other higher level qualification (Nursing, Teaching etc.), aeduc: 1, A-level, oeduc:1, GCSE, poeduc: 1, Pre-GCSE
Health satisfaction Hlstat 1: poor, 2: medium, 3: good, 4: excellent
Job satisfaction: total pay jbsat2x 1: no satisfaction, 2: very dissatisfied, 3: dissatisfied, 4: neither satisfied nor dissatisfied, 5: satisfied, 6: very satisfied and 7: completely satisfied
Job satisfaction: security jbsat4x 1: no satisfaction, 2: very dissatisfied, 3: dissatisfied, 4: neither satisfied nor dissatisfied, 5: satisfied, 6: very satisfied and 7: completely satisfied
Job satisfaction: work itself jbsat6x 1: no satisfaction, 2: very dissatisfied, 3: dissatisfied, 4: neither satisfied nor dissatisfied, 5: satisfied, 6: very satisfied and 7: completely satisfied
Job satisfaction: hours worked jbsat7x 1: no satisfaction, 2: very dissatisfied, 3: dissatisfied, 4: neither satisfied nor dissatisfied, 5: satisfied, 6: very satisfied and 7: completely satisfied
Job satisfaction: overall jbsat 1: no satisfaction, 2: very dissatisfied, 3: dissatisfied, 4: neither satisfied nor dissatisfied, 5: satisfied, 6: very satisfied and 7: completely satisfied
Life satisfaction: overall lfsato 1: no satisfaction, 2: very dissatisfied, 3: dissatisfied, 4: neither satisfied nor dissatisfied, 5: satisfied, 6: very satisfied and 7: completely satisfied
General happiness ghql 1: much less than usual (least happy), 2: less than usual (less happy), 3: same as usual (happy) and 4: more than usual (very happy)
You will also find information on residence of the respondent captured by a set of regional dummies (reg1x to reg12x). You need to choose one of the satisfaction variables from the list of satisfaction variables (hlstat, jbsat2x, jbsat4x, jbsat6x, jbsat7x, jbsat, lfsato and ghql) and only one wave of data (either wave 17 or wave 18). Your choice of satisfaction variable and wave should not match that of any other student who is enrolled in the course. So for example, if one of you is working with health satisfaction using wave 17 data, then none of the others can work with health satisfaction using wave 17 data. Given the data-set, you need to answer the following:
a) Estimate an ordered probit model using the satisfaction variable as your dependent variable (depending on your choice), where satisfaction depends on number of children in the household, sex of the respondent and real annual household income. Comment on your findings.
b) Now add marital status, educational status, change in financial situation compared to last year, expectation about the financial situation for a year ahead and whether the respondent saves from current income, along with the set of explanatory variables that you have used in part a). Test whether the set of new explanatory variables are jointly significant or not in explaining your satisfaction variable. Comment on your findings.
c) Calculate the marginal effects with respect to real annual household income, change in financial situation compared to last year, expectation about the financial situation for a year ahead, and whether the respondent saves from current income. Comment on your findings.
Project 4
For Project 4, you need to use the Project 3, 4&5.dta. The data is from the last two waves of the British Household Panel Survey: wave 17 and wave 18. The description of the variables is listed in Table 1:
Table 1
Variable Variable Name in the Data File Description of the Variable
Personal identification number pid
Wave number wave Either 17 or 18
Household identification number hid
Number of children in the household nkids Ranges from 0 to 6
Real (1987=100) annual household income rfihhyr In real GBP
Sex of the respondent male Male =1 , Female =0
Change in financial situation compared to last year fisitcd1, fisitcd2, fisitcd3 fisitcd1: better, fisitcd2: worse
fisitcd3: same
Expectation about the financial situation for a year ahead fisitxd1, fisitxd2, fisitxd3 fisitxd1: better, fisitxd2: worse
fisitxd3: same
Whether the respondent saves from current income save Save: 1 = yes, 0 = No
Marital status mastatd1,mastatd2,
mastatd3,mastatd4,
mastatd5,mastatd6, mastatd1: Married, mastatd2: Living as Couple, mastatd3: Widowed, mastatd4: Divorced, mastatd5: Separated, mastatd6: Single
Educational status neduc, ueduc, oheduc, aeduc, oeduc, poeduc neduc: 1, no formal educational qualification, ueduc: 1, University degree, oheduc: 1, other higher level qualification (Nursing, Teaching etc.), aeduc: 1, A-level, oeduc:1, GCSE, poeduc: 1, Pre-GCSE
Health satisfaction hlstat 1: poor, 2: medium, 3: good, 4: excellent
Job satisfaction: total pay jbsat2x 1: no satisfaction, 2: very dissatisfied, 3: dissatisfied, 4: neither satisfied nor dissatisfied, 5: satisfied, 6: very satisfied and 7: completely satisfied
Job satisfaction: security jbsat4x 1: no satisfaction, 2: very dissatisfied, 3: dissatisfied, 4: neither satisfied nor dissatisfied, 5: satisfied, 6: very satisfied and 7: completely satisfied
Job satisfaction: work itself jbsat6x 1: no satisfaction, 2: very dissatisfied, 3: dissatisfied, 4: neither satisfied nor dissatisfied, 5: satisfied, 6: very satisfied and 7: completely satisfied
Job satisfaction: hours worked jbsat7x 1: no satisfaction, 2: very dissatisfied, 3: dissatisfied, 4: neither satisfied nor dissatisfied, 5: satisfied, 6: very satisfied and 7: completely satisfied
Job satisfaction: overall jbsat 1: no satisfaction, 2: very dissatisfied, 3: dissatisfied, 4: neither satisfied nor dissatisfied, 5: satisfied, 6: very satisfied and 7: completely satisfied
Life satisfaction: overall lfsato 1: no satisfaction, 2: very dissatisfied, 3: dissatisfied, 4: neither satisfied nor dissatisfied, 5: satisfied, 6: very satisfied and 7: completely satisfied
General happiness ghql 1: much less than usual (least happy), 2: less than usual (less happy), 3: same as usual (happy) and 4: more than usual (very happy)
You will also find information on residence of the respondent captured by a set of regional dummies (reg1x to reg12x). You need to choose one of the satisfaction variables from the list of satisfaction variables (hlstat, jbsat2x, jbsat4x, jbsat6x, jbsat7x, jbsat, lfsato and ghql) and use both waves of the data-set (wave 17 and wave 18). You need to create a dummy variable for any one of the waves (either wave 17 or wave 18). Your choice of satisfaction variable should not match that of any other student who is enrolled in the course. So for example, if one of you is working with health satisfaction, then none of the others can work with health satisfaction. Given the data-set, you need to answer the following:
a) Estimate an ordered logit model using the satisfaction variable as your dependent variable (depending on your choice), where satisfaction depends on sex of the respondent, real annual household income, change in financial situation compared to last year, expectation about the financial situation for a year ahead, and whether the respondent saves from current income, along with the dummy variable for one of the waves. Report the results in terms of the odds ratios and comment on your findings.
b) Test whether the assumption of parallel line is valid or not using a Brant test and comment.
c) Now add marital status, educational status, number of children in the household, along with the set of explanatory variables that you have used in part a). Estimate an ordered logit model and comment on your findings.
Project 5
For Project 5, you need to use the Stata data set Project 3, 4&5.dta. The data is from the last two waves of the British Household Panel Survey: wave 17 and wave 18. The description of the variables is listed in Table 1:
Table 1
Variable Variable Name in the Data File Description of the Variable
Personal identification number Pid
Wave number wave Either 17 or 18
Household identification number Hid
Number of children in the household nkids Ranges from 0 to 6
Real (1987=100) annual household income rfihhyr In real GBP
Sex of the respondent male Male =1 , Female =0
Change in financial situation compared to last year fisitcd1, fisitcd2, fisitcd3 fisitcd1: better, fisitcd2: worse
fisitcd3: same
Expectation about the financial situation for a year ahead fisitxd1, fisitxd2, fisitxd3 fisitxd1: better, fisitxd2: worse
fisitxd3: same
Whether the respondent saves from current income save Save: 1 = yes, 0 = No
Marital status mastatd1,mastatd2,
mastatd3,mastatd4,
mastatd5,mastatd6, mastatd1: Married, mastatd2: Living as Couple, mastatd3: Widowed, mastatd4: Divorced, mastatd5: Separated, mastatd6: Single
Educational status neduc, ueduc, oheduc, aeduc, oeduc, poeduc neduc: 1, no formal educational qualification, ueduc: 1, University degree, oheduc: 1, other higher level qualification (Nursing, Teaching etc.), aeduc: 1, A-level, oeduc:1, GCSE, poeduc: 1, Pre-GCSE
Health satisfaction hlstat 1: poor, 2: medium, 3: good, 4: excellent
Job satisfaction: total pay jbsat2x 1: no satisfaction, 2: very dissatisfied, 3: dissatisfied, 4: neither satisfied nor dissatisfied, 5: satisfied, 6: very satisfied and 7: completely satisfied
Job satisfaction: security jbsat4x 1: no satisfaction, 2: very dissatisfied, 3: dissatisfied, 4: neither satisfied nor dissatisfied, 5: satisfied, 6: very satisfied and 7: completely satisfied
Job satisfaction: work itself jbsat6x 1: no satisfaction, 2: very dissatisfied, 3: dissatisfied, 4: neither satisfied nor dissatisfied, 5: satisfied, 6: very satisfied and 7: completely satisfied
Job satisfaction: hours worked jbsat7x 1: no satisfaction, 2: very dissatisfied, 3: dissatisfied, 4: neither satisfied nor dissatisfied, 5: satisfied, 6: very satisfied and 7: completely satisfied
Job satisfaction: overall jbsat 1: no satisfaction, 2: very dissatisfied, 3: dissatisfied, 4: neither satisfied nor dissatisfied, 5: satisfied, 6: very satisfied and 7: completely satisfied
Life satisfaction: overall lfsato 1: no satisfaction, 2: very dissatisfied, 3: dissatisfied, 4: neither satisfied nor dissatisfied, 5: satisfied, 6: very satisfied and 7: completely satisfied
General happiness ghql 1: much less than usual (least happy), 2: less than usual (less happy), 3: same as usual (happy) and 4: more than usual (very happy)
You will also find information on residence of the respondent captured by a set of regional dummies (reg1x to reg12x). You need to choose one of the satisfaction variables from the list of satisfaction variables (hlstat, jbsat2x, jbsat4x, jbsat6x, jbsat7x, jbsat, lfsato and ghql) and use both waves of the data-set (wave 17 and wave 18). Your choice of satisfaction variable should not match that of any other student who is enrolled in the course. So for example, if one of you is working with health satisfaction, then none of the others can work with health satisfaction. Given the data-set, you need to answer the following:
a) Irrespective of the ordinal nature of the satisfaction variable, treat the variable as a continuous variable. Form a panel data-set where pid represents the cross-sectional unit and wave represents the time variable. Estimate a linear panel data random effects model using one of the satisfaction variables as your dependent variable (depending on your choice), where satisfaction depends on number of children in the household, sex of the respondent, real annual household income, marital status, educational status, change in financial situation compared to last year, expectation about the financial situation for a year ahead, and whether the respondent saves from current income. Comment on your findings.
b) Now estimate a linear panel data fixed effects model and perform a Hausman test in order to choose between random-effects and fixed-effects model. Comment on your findings.
c) Depending on your results in part b), select the model as indicated by the Hausman test. Now add the regional dummies and comment on your results.
Assignments should be a maximum of 1500 words in length excluding the references (if you want any reference to be cited) and the Tables.
All course work assignments that contribute to the assessment of a module are subject to a word limit, as specified in the module handbook for that module. Unless stated specifically otherwise in the relevant module handbook EVERYTHING except the title, bibliography and any appendices is included in the word count. A detailed explanation of word limit rules can be found at the following link https://lubswww.leeds.ac.uk/code-of-practice/coursework/
The deadline date for this assignment is 12.00 Noon on May 17, 2016
An electronic copy of the assignment must be submitted to the Assignment Submission area within the module resource on the Blackboard VLE website no later than 12.00 Noon on May 17, 2016, the deadline date. Failure to meet this initial deadline will result in a reduction of marks.
SUBMISSION
Please ensure that you leave sufficient time to complete the online submission process, as upload times can vary. Accessing the submission link before the deadline does NOT constitute completion of submission. You MUST click the ‘CONFIRM’ button before 12 noon for your assignment to be classed as submitted on time, if not you will need to submit to the Late Area and your assignment will be marked as late. It is your responsibility to ensure you upload the correct file to the VLE, and that it has uploaded successfully.
It is important that any file submitted follows the conventions stated below:
FILE NAME
The name of the file that you upload must be your student ID only.
ASSIGNMENT TITLE
During the submission process the system will ask you to enter the title of your submission. This should also be your student ID only.
FRONT COVER
The first page of your assignment should always be the Assessed Coursework Coversheet (individual), which is available to download from the following location:
https://lubswww.leeds.ac.uk/code-of-practice/downloadable-forms/
STUDENT NAME
You should NOT include your name anywhere on your assignment
END
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