Could you help me solve this question. Many thanks !

The Dow-Jones daily returns for the period 1920-2006 under the normal likelihood show a

raw mean of 0.00020 and standard deviation of 0.01140. Skewness is -0.6673 and kurtosis

29.7454.

(a) Calculate the annual mean and variance.

(b) Calculate the Jarque-Bera statistic and perform the hypothesis test. Write down the

null and alternative hypotheses. Run a 2 test with 2 degrees of freedom. Refer to the

tables given for the chi-square distribution. (N = 19566)

(c) What does the term “normally distributed returns” mean? What do your results say

about non-normality.

)

4

( ( 3)

6

3

2

JB N S K

Tail (right) 2 Tail (right) 2

0.5 1.38629

0.95 0.10259 0.25 2.77259

0.99 0.0201 0.1 4.60517

0.975 0.05064 0.05 5.99146

0.95 0.10259 0.025 7.37776

0.9 0.21072 0.01 9.21034

0.75 0.57536 0.005 10.5966