## Plot excess returns over time and sampling distribution in Canada and Portugal. Compare and contrast the two graphs in a couple of lines.

### computer science

##### Description

Empirical Assignment, Fall19

Due Dec 8th

Please answer to these questions in an organized word file and with one submission per team. Make sure you put all your names in the file. If you don’t have a team you will have to submit individually. The data you will use is already on Blackboard and is under the name JSTdatasetR4. If you want to work in R, use my sample code as a basis. You can also work in Excel; just make sure to answer all questions. I will not give credit for half-answered questions. Good luck!

1.      Plot excess returns over time and sampling distribution in Canada and Portugal. Compare and contrast the two graphs in a couple of lines.

2.      What is correlation of the two risk premiums in the two countries? Create a scatterplot.

3.      Compute the first four moments for excess returns for the two countries and compare in a couple of lines.

4.      Conduct a t-test to check if there are statistically significant differences between the means of the risk premia in the two countries.

5.      Repeat problems 1 to 4 for dividend yields.

6.      Does div yield predict stock returns in the Canada? Answer using regression analysis and use a lag of one year : 7.      Does div yield predict stock returns in Portugal? Answer using regression analysis and use a lag of one year : 8.      What about other control variables in Canada? Do the results in 6 change? (Add real gdp per capita growth, trade deficit as a % of nominal gdp, and the term-spread defined as the difference between variables stir and ltrate). Discuss measures of fit and significance of predictors.

9.      What about other control variables in Portugal? Do the results in 7 change? (Add real gdp per capita growth, trade deficit as a % of nominal gdp, and the term-spread defined as the difference between variables stir and ltrate). Discuss measures of fit and significance of predictors.

10.  Is there any evidence that financial crises play a role in the two risk premiums of the two countries? (Hint use regression with a dummy variable)