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A Solution Manual to The Econometrics of Financial Markets Petr Adamek John Y. Campbell Andrew W. Lo A. Craig MacKinlay Luis M. Viceira Author address: MIT Sloan School, 50 Memorial Drive, Cambridge, MA 02142{1347 Department of Economics, Harvard University, Littauer Center, Cambridge, MA 02138 MIT Sloan School, 50 Memorial Drive, Cambridge, MA 02142{1347 Wharton School, University of Pennsylvania, 3620 Locust Walk, Philadelphia, PA 19104{6367 Department of Economics, Harvard University, Littauer Center, Cambridge, MA 02138 Contents List of Figures List of Tables Preface Problems in Chapter 2 Solution 2.1 Solution 2.2 Solution 2.3 Solution 2.4 Solution 2.5 Problems in Chapter 3 Solution 3.1 Solution 3.2 Solution 3.3 Solution 3.4 Solution 3.5 Solution 3.6 Solution 3.7 Problems in Chapter 4 Solution 4.1 Solution 4.2 Solution 4.3 Problems in Chapter 5 Solution 5.1 Solution 5.2 Solution 5.3 Solution 5.4 Problems in Chapter 6 Solution 6.1 Solution 6.2 Solution 6.3 Problems in Chapter 7 Solution 7.1 Solution 7.2 Solution 7.3 Solution 7.4 Solution 7.5 v vii 1 3 3 3 3 3 4 9 9 10 10 11 13 13 19 23 23 23 24 25 25 26 27 27 29 29 30 30 33 33 34 34 35 36 iii iv Problems in Chapter 8 Solution 8.1 Solution 8.2 Solution 8.3 Problems in Chapter 9 Solution 9.1 Solution 9.2 Solution 9.3 Solution 9.4 Problems in Chapter 10 Solution 10.1 Solution 10.2 Problems in Chapter 11 Solution 11.1 Solution 11.2 Problems in Chapter 12 Solution 12.1 Solution 12.2 Solution 12.3 CONTENTS 37 37 39 41 45 45 45 46 48 51 51 52 55 55 58 61 61 62 62 List of Figures 2.1 Histograms of returns on indexes; 1962{1994 3.1 3.2 3.3 3.4 3.5 3.6 3.7 Histogram for IBM Stock Price Histogram of IBM Price Changes Histogram of IBM Price Changes Falling on Odd or Even Eighth Histogram of Times Between Trades for IBM IBM Price and Volume on Jan 4, 1988 IBM