ECON-4200_Winter_2022_Assignment_2 TRENT UNIVERSITY DEPARTMENT OF ECONOMICS ECON-4200 ASSIGNMENT 2 DUE: MARCH 28, 2022 Question 1: Using data for the excess monthly returns of Volkswagen shares and...

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ECON-4200_Winter_2022_Assignment_2
TRENT UNIVERSITY
DEPARTMENT OF ECONOMICS
ECON-4200
ASSIGNMENT 2
DUE: MARCH 28, 2022
Question 1:
Using data for the excess monthly returns of Volkswagen shares and the Dow Jones Index for the
period January 2003 to December 2020:
(a) Estimate a CAPM regression model and interpret the results.
(b) Suppose you want to conduct an “event analysis” of the effects of Volkswagen’s 2015
emissions scandal within the context of a CAPM model. Explain how you would augment
your specification in part (a) to estimate the event analysis.
(c) Estimate the model specification you have described in part (b).
(d) Interpret the results of the estimated model. What do those results tell us about how the
market responded to the scandal?
Answered Same DayMar 29, 2022

Answer To : ECON-4200_Winter_2022_Assignment_2 TRENT UNIVERSITY DEPARTMENT OF ECONOMICS ECON-4200 ASSIGNMENT 2...

Komalavalli answered on Mar 29 2022
18 Votes
a.
MODEL A
Coefficients:
Estimate Std. E
or t value Pr(>|t|)
(Intercept) 0.45
84 0.8132 0.564 0.574
Dow_Excess 0.7782 0.1765 4.409 1.65e-05 ***
Residual standard e
or: 11.23 on 214 degrees of freedom
Multiple R-squared: 0.08326,    Adjusted R-squared: 0.07898
F-statistic: 19.44 on 1 and 214 DF, p-value: 1.646e-05
y = 0.4584 + 0.7782 x1+e
The result shows that the variable is statistically different from zero. The fraction of variability excess return explained by the movements in the market...
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