Nobel Prize Winning Ideas in Financial Economics & Current Topics

For this assignment, download daily prices for the NASDAQ Composite (^IXIC) from 1/31/1990 until 10/30/2020. For each trading day and using Microsoft Excel, compute the daily returns of the index. Then generate a time-varying volatility series using the following methods:

1. 20-day moving average
2. EWMA model using a value for lambda of 0.94
3. GARCH(1,1) model using a long-run volatility of 20.83% per year, alpha coefficient of 0.0959 and beta coefficient of 0.8907

Generate a plot of all series in the same graph using annualized values, i.e. multiply the values by the square-root of 252. Please comment briefly on the differences between the methods used to estimate the volatility of NASDAQ returns. Create a report in Microsoft Word, save as pdf.