Financial Econometrics Coursework Essay Example | Topics and Well Written Essays - 2000 words

Financial Econometrics Coursework - Essay ExampleIn 2003, the U.S. Securities and Exchange commission (SEC) mentioned that the R-squ be of the regression analysis was insufficient to determine the effectiveness of hedging. In a speech by a professional accounting fellow from the office of the boss accountant of the U.S. Securities and Exchange Commission, stated that determination of hedge effectiveness should consider the gear of the coefficient of the regression analysis. This coefficient reflects the minimum variance hedge ratio.1The interpretation of the regression slope coefficient is the average change in the dependent variable real total disbursement on food for a unit increase in the self-supporting variable Real total expenditure on goods and services. The slope coefficient it 0.32, thus for every 1 unit change in real total expenditure on goods and services, there is a 0.32 unit change in real expenditure on food.Omission of an important independent variable such as re al price of food relative to other goods will result in the decreased ability of the model to predict the real total expenditures on food given the real total expenditures on food.The independent variables used to predict 99.9% of the dependent variable real consumption expenditure as indicated by the value of the adjusted-R Squared. The Durbin-Watson value of 1.85 indicates there is no signs of first-order serial correlation in the residuals of a time series regression. The values of Akaike info criterion (AIC) -268.2093 and Schwarz criterion -273.6530 are extremely low indicating the need for modification in the regression model by changing the independent variables. The t-statistic value could be compared with the critical t-value which is not available.The report Probability is the p-value, or marginal significance level. Since this probability value of the regression analysis (F-statistic) is less than the size of the test, say 0.05, the null hypothesis could be rejected. This indicates that the