Use PcGive to do the necessary calculation and graphs in the paper.

In the ‘Assessments’ folder you will find an Excel spreadsheet which contains monthly data for the FTSE 100 Index (FTSE100, proxy for the market price), the share prices for Barclays Plc (BARC) and Lloyds Banking Group Plc (LLOY) for the 20-year period January 1995 to December 2014.

All results should be properly tabulated in the main body of the assignment along with any diagrams you find useful. You should not include the raw PcGive or EXCEL output. This should be reformulated into your own tables. Keep your answers as precise and concise as possible. You should properly reference any relevant econometric literature (theoretic and applied) referred to in the text.

a) Calculate the percentage rate of return for Barclays, Lloyds and the FTSE 100 Index, providing a clear explanation of the method you use. Graph the returns, provide the descriptive statistics and discuss your results.
(20 marks)

b) Carry out an appropriate test to determine whether each return series in (a) is stationary. Explain the importance of your results.
(20 marks)

c) Using a ‘market model’ specification, estimate the beta values for the Barclays and Lloyds stock, and check the adequacy of the model using appropriate diagnostic tests. Formally test whether these stocks can be classed as defensive, neutral or aggressive.
(30 marks)

d) Expand the simple market model for the Barclays stock return in (c) into one multivariate regression model to investigate whether:
1) Barclays’ Premier League sponsorship since August 2001 has positively affected its stock returns.
2) the main competitor Lloyds’ performance had an impact on Barclays stock return.
(30 marks)