125.785 S1 2021 — Assignment 2
Due date: 28thMay2021(4th June 2021)
Part A. Critical Reading(Two
articles, 20 points. 10 for each).
Read the
following two articles and write a report. The report should provide a summary
on the research. The focus should be on describing and commenting on the
econometric models and analyses used in the study. The common points are how
the data is treated before testing, why the models are chosen, what are the relative
advantages of the used models, and how these advantages are shown in the
results, etc.)
Write in either
report or essay format, about 500 to 1000 wordsfor each article.
Morck R., A. Shleifer and R. W.
Vishny(1989), `Alternative Mechanisms for Corporate Control , American Economic Review79, no. 4, 842-852.
Habibullah, M. S., P. Smith, and
W. N. W. Azman-Saini (2006). Testing liquidity constraints in 10 Asian
developing countries: an error-correction model approach. Applied Economics,
38, 25352543
Focusing on
the methodology issues
Data treatment: explain advantage
Result: describe the major result in terms of
the statistics words.
How the results are discussed.
Testing procedure, logic reasoning.
Part B (10 points). Practice panel data and binary regressions:
(with the help of R
and SAS command files used in lectures)
Step 1
Download the Stream provided data(Assignment2_data.xlsx)
of Fama-French 5 Factors for the 4 regions (European, Japanese, Asia Pacific
and North American) and comment on the data structure noticing the two
indicators for time series and cross section.
Step 2
Applying the model (Mkt_RF
=a+b1*SMB+b2*HML+b3*RMW+b4*CMA) to do the following operations:
i) Run OLS time series regression for each individualregion;
ii) Run OLS regression using the paneldata (of all 4 regions);
iii) Try various panel data fix/random region/time effects
regressionmodels.
Step 3
Write a report of the Panel data
regression results. The questions to be answered by the regressionresults:
1)
Is there any relation between the
dependent variable and each independent variable?
2)
Is the identified relation(s)
based upon certain conditions in terms of regions or times?
You should interpret and discuss
your results (such as what are the significant factors in each regression, make
your comments on comparing the regional OLS regressions against pooled (panel)
OLS regressions, and fixed effects regression against random effects
regressions, etc.)
Step 4
Continue to use the data set to
create some dummy (binary) variables.
For example, to create the
variable for Japan region and run the probit model.
Step 5
Interpret the result of the binary
model in terms of marginal effects and discrete change effects located at the
point of the mean values. You may need to calculate the values of some
statistics and mean values of the regression variables to meet the requirement.
Submission (to the Stream Drop-Box
of the assignment):
Part A: A Word file;
Part B: A Word file (including the
commands and regression results in your report by copy-paste to the Word fie
of your report).
Marginal effect is also related to
the location of the observation
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