[Solved] Homework 3 FE542

Problem 1 (50pt)

In R create a report in pdf format using RMarkdown (or, if you choose to use Python instead, create a Jupyter notebook) to:

• Download daily price data for January 1, 1980 through December 31, 2019 of Boeing stock from Yahoo Finance. You may use the quantmod package in R for this purpose.
• Is there any evidence of serial correlations in the monthly log returns. Use autocorrelations and 5% significance level to answer the question. If yes, remove the serial correlations.
• Is there any evidence of ARCH effects in the monthly log returns? Use the residual series if there are serial correlations in part (ii). Use Ljung-Box statistics for the squared returns (or residuals) with 6 and 12 lags of autocorrelations and 5% significance level to answer the question.
• Identify an ARCH model for the data and fit the identified model. Write down the fitted model and justify your choice of parameters.

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