1 of 5Finance Trading Strategies FNCE5007Semester 1, 2021PROJECTThis Project is to be completed individually or in pairs.Issue date: 12 April 2021Submission details –• Due time and date: 11am, Monday, 17 May 2021.• Your analysis is to be submitted to the Turnitin portal under the assessments tab of BlackBoard. If you have any concerns or difficultieswith the Turnitin submission, you should email your submission toyour Unit Coordinator, John Gould (j.gould@curtin.edu.au). Do notupload/email spreadsheets.• Attach this page as a cover sheet: enter your personal details in thespace provided and sign and date the declaration.This Project is worth 50 marks in total and contributes 50% towards youroverall grade for Finance Trading Strategies. GROUPMEMBERFAMILY NAMEGIVEN NAMESTUDENT NUMBER12 I/we declare that this submission is my/our own original work.Signature 1: Date:Signature 2: Date:2 of 5Disclaimer!As demonstrated in lectures, you can use Excel to run your regression analyses. However, Excel is not a specialist statistics program, consequently youare cautioned against relying solely on it for any professional interpretationof the regressions. In particular, Excel’s regression coefficient t-statistics andp-values are unadjusted for residual heteroscedasticity and autocorrelationand may be biased towards significance.BACKGROUNDYou are tasked with identifying and reviewing the existence (or non-existence) of some stock return “regularities” for a sample of ASX-listed stocksfor the period February 2006 to January 2021. The sample is comprised of thetop 20 stocks by market capitalisation of the S&P/ASX200 Index, identifiedand updated on the last trading day of January each year from 2006 to 2020(resulting in a sample of 20×15=300 stock-years). The sample data is provided in the file FinTradStrat_Project_2021sem1_Data.xlsx.ANALYSISA) Regression analysisRun the following regression model:?????? = ?? + ??1 max�??????-?? 1, 0� + ??2 min�??????-?? 1, 0�+??3 max�??????[??-20,-2], 0� + ??4 min�??????[??-20,-2], 0�+??5 max�??????[??-220,-21], 0� + ??6 min�??????[??-220,-21], 0�+??7????????[??-20,-1] + ??8??????????[??-20,-1]+??9???????? ?? + ??10???????????? ?? + ??11??”????”1) for daily returns occurring in months other than June, and2) for daily returns occurring in June months onlywhere, for each stock-year sample, i: the dependent variable is daily abnormalreturn, ?????? = �???? – ????� – ??[??-200,-1](???? – ????); ???? is the daily (continuouslycompounded) return; ???? is the daily Reserve Bank of Australia cash rate; ????is the daily market return for the S&P/ASX200 Index; ??[??-200,-1] is the marketbeta estimated over the [-200,-1] trading day window; ??????-?? 1 = (??-??1 – ??-??1)is the one-day lagged excess return; ??????[??-20,-2] and ??????[??-220,-21] are thecumulative excess returns for the [-20,-2] and [-220,-21] trading day windowsrespectively; ????????[??-20,-1] and ??????????[??-20,-1] are the daily abnormal (idiosyncratic) return volatility and skewness, respectively, over the [-20,-1] tradingday window; ???????? ?? (???????????? ?? ) is a dummy variable that equals 1 when theprior day’s closing stock price has crossed up (down) through the averagedaily VWAP for the [-20,-1] trading day window, and zero otherwise; and??”????” is a dummy variable that equals 1 for stocks with a ticker symbol beginning with “C”, and zero otherwise.3 of 5Present a table of your regression coefficients with indication of their statistical significance (6 marks – see Table 1 for an example).B) End-of-financial year event study analysisSetting the last trading day of June as event day zero, calculate cumulativeaverage abnormal returns (CAARs) for event days t=-15 to t=+15, wheredaily abnormal return is calculated as:???????? = �?????? – ??????� – ??[??-220,-21](?????? – ??????).Additionally calculate CAARs separately for:1) “past winners” and “past losers” subsamples; and2) “past winners in up-markets”, “past winners in down-markets”, “past losers in up-markets” and “past losers in down-markets” subsamples.Identify past winners and losers as those stocks for which trailing cumulativeexcess return, ??????[-220,-21]??= ∑(?????? – ??????– ??=21 -220), is >0 and 0 and 01950.0052-0.00260.0026(1.4042)(-0.8459)(0.6611)Past losers??????[-220,-21]??0 & ??????[-220,-21]?? >0????(?)(?)(?)Past winners in down-markets??????[-220,-21]??>0 & ??????[-220,-21]??
