Session 6, February 12
Assignment 1: Create a log of returns
data(either by log(St- St-1) or log(S(t)- S(t-1)/S(t-1)) and calculate
the historical volatility. Use NSE index for last one year 1/1/2012 to
31/01/2013) work with closing prices.
Solution: Command
> stockprice<-read.csv(file.choose(),header=T)
> closingprice<-stockprice[,5]
> closingprice.ts<-ts(closingprice, frequency=252)
> lagtable<-cbind(closingprice.ts,lag(closingprice.ts,k = -1), closingprice.ts-lag(closingprice.ts,k = -1))
> returns<-(closingprice.ts-lag(closingprice.ts,k=-1))/lag(closingprice.ts,k=-1)
> returns.scale<-scale(returns)+10
> logreturns<-log(returns.scale)
> acf(logreturns)
Fron the visual examination of the plot it is clear the values lie between the designated confidence interval as a result the data is stationary.
Assignment 2: Create ACF plot and interpret the results for log returns data and do ADF and interpret the result
Solution: Command
> stockprice<-read.csv(file.choose(),header=T)
> closingprice<-stockprice[,5]
> closingprice.ts<-ts(closingprice, frequency=252)
> lagtable<-cbind(closingprice.ts,lag(closingprice.ts,k = -1), closingprice.ts-lag(closingprice.ts,k = -1))
> returns<-(closingprice.ts-lag(closingprice.ts,k=-1))/lag(closingprice.ts,k=-1)
> returns.scale<-scale(returns)+10
> logreturns<-log(returns.scale)
> acf(logreturns)
Fron the visual examination of the plot it is clear the values lie between the designated confidence interval as a result the data is stationary.
Assignment 2: Create ACF plot and interpret the results for log returns data and do ADF and interpret the result
Solution:
Command:
T<-252^.5
> Historicalvolatility<-sd(returns)*T
> Historicalvolatility
After the historical volatility is obtained, Augmented
Dicky-Fuller Test is done on the returns value.
> adf.test(logreturns)
1.1 Plot to show the
stationarity of the data set
1.2 Screenshot of the Historical data
and the result obtained after the ADF test.
Conclusion: From the ADF test result, it is clear that the p value is
less than alpha (0.05). Hence the null hypothesis is rejected and it can be
said that the TS is stationary.
