Tasks tackled for Question Two
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Topics Your task is to test a hypothesis (see topics below). You need to discuss the following steps:
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(1) data collection (e.g. method of sampling, data sources, selection criteria);
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(2) definition of variables (e.g. control variables);
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(3) model specification (e.g. Unit root, Cointegration framework; ARCH/GARCH models);
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(4) interpretation of findings and conclusion
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Please select one of the following topics / hypothesis.
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2.1. Economic policy uncertainty is known to exert a statistically significant and negative impact on bond yields. This is consistent with the theory that investors tend to increase their demands in bonds during periods of higher economic or government policy uncertainty and thereby increasing bond prices and reducing their yields.
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You can collect bond data from the database of the US Treasury for the US data and the Bank of England for the UK data, for instance. The data of US government bonds are updated daily at website: https://www.treasury.gov/resource-center/data-chart-center/interest-rates. The data of UK government bonds are daily updated at website: uk/statistics/yield-curves“>https://www.bankofengland.co.uk/statistics/yield-curves.
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You can try to use unit root tests (to identify non-stationarity) and cointegration methods to understand the nature of co-movement between the variables.
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