ECONOMIC ANALYSIS

Economic Analysis



Economic Analysis

Unit 1-1

DQ #1: Analyze a research topic that you may have been exposed to (from academic journals only). Compare the process from the readings to what you have seen. What's missing and how would they improve on that research?

Duplicating portfolio is a portfolio, in which the yield is correlated with a variable. For example, a portfolio can duplicate the economic variable. Yield for the month of stocks and bonds are used to predict the volume of production, gross income, inflation, yields stocks and bonds. This predictive relationship clarifies the idea of portfolios which reflect the expectations of the market value at the expense of future economic variables. The use of overlapping returns of portfolios as a tool forecast, in that forecast tool following values of economic variables significantly increases. The estimated sensitivity of asset prices to news about the importance of the future of these variables. Also, this portfolios used in forecasting macroeconomic variables and hedging economic risk (Tim, 2006, 307). In economics, the establishment of any activity is forecast. Which already based on the forecast prepared an action plans and activities. Thus, you can say that the forecast of macroeconomic variables is the fundamental component of all "economic" plans activity. Forecasting can be carried out on the basis of qualitative (expert) and using quantitative methods. Last they can do without a qualitative analysis, as well as expert opinions, must be supported reasonable estimates. In this paper, I focused on one of the quantitative methods Forecasting duplicating portfolio. By itself, the construction of such portfolio does not give information about the future, but the construction of duplicate portfolio for following variables reveals a pattern movement of asset returns and projected macroeconomic variables (Campbell, Roger, 1991, 569).

Answer of Q.2Prediction is the way of empirical prediction, which is used as a experience and current assumptions about the future in order to its definition. The main function of the forecast - study of a possible state facility in the future, or identify alternative routes. The choice of a method is one of the most significant forecasting problems. There many methods to make a prediction, but must be extracted from them number of justifiable for a purpose. The economic forecast is the assumption that future state of the economy to a large extent predetermined by its past and these states. The future brings an element of uncertainty. It due to the following factors:

The presence of not one but many possible options for development;

Operation of economic laws in the future depends not only the past the present state of the economy, but also on management decisions, which have yet to be adopted and implemented;

Incompleteness of the degree of knowledge of economic laws, the deficit and lack of reliable information. Under prediction methods should be understood as the totality of methods and techniques thinking, enabling on the basis of historical data, external and internal ties of the object of forecasting, as well as their measurements within the phenomenon or process ...