Final exam

Final Exam¶

This self-grading notebook serves as a final exam for the introductory course. If you have grasped the contents of the course, you should be able to complete this exam.

It is essential that you answer each cell by assigning the solution to QUESTION_# where # is the question number.

We will start with a warm-up question that is already answered.

Question 0¶

Create a 3-element 1-dimensional array containing the values [1,1,1]

Note: This answer is not assessed.

Question 1¶

Construct the correlation matrix

as a NumPy array.

Question 2¶

Construct the correlation matrix

as a DataFrame with columns and index both equal to ['A', 'B', 'C'].

Question 3¶

Load the momentum data in the CSV file momentum.csv, set the column date as the index, and ensure that date is a DateTimeIndex.

Question 4¶

Construct a DataFrame using the data loaded in the previous question that contains the returns from momentum portfolio 5 in March and April 2016.

Question 5¶

What is the standard deviation of the data:

Note Use 1 degree of freedom in the denominator.

Question 6¶

Compute the correlation matrix of momentum portfolios 1, 4, 6, and 10 as a DataFrame where the index and columns are the portfolio names (e.g., 'mom_01') in the order listed above.

Question 7¶

Compute the percentage of returns of each of the 10 momentum portfolios that are outside of the interval

where $\hat{\mu}$ is the mean and $\hat{\sigma}$ is the standard deviation computed using 1 dof. The returned variable must be a Series where the index is the portfolio names ordered from 1 to 10.

Question 8¶

Import the data the data in the sheet question 8 in final-exam.xlsx into a DataFrame where the index contains the dates and variable name is the column name.

Question 9¶

Enter the DataFrame in the table below and save it to HDF with the key 'question9'. The answer to this problem must be the full path to the hdf file. The values in index should be the DataFrame's index.

Note: If you want to get the full path to a file saved in the current directory, you can use

import os

file_name = 'my_file_name'
full_path = os.path.join(os.getcwd(), file_name)

Question 10¶

Compute the cumulative return on a portfolio the longs mom_10 and shorts mom_01. The first value should be 1 + mom_10.iloc[0] - mom_01.iloc[0]. The second cumulative return should be the first return times 1 + mom_10.iloc[1] - mom_01.iloc[1], and so on. The solution must be a Series with the name 'momentum_factor' and index equal to the index of the momentum DataFrame.

Note: The data in the momentum return file is in percentages, i.e., a return of 4.2% is recorded as 4.2.

Question 11¶

Write a function named QUESTION_11 that take 1 numerical input x and returns:

• $exp(x)$ is x is less than 0
• $log(1+x)$ if x is greater than or equal to 0

Question 12¶

Produce a scatter plot of the momentum returns of portfolios 1 (x-axis) and 10 using only data in 2016. Set the x limits and y limits to be tight so that the lower bound is the smallest return plotted and the upper bound is the largest return plotted. Use the 'darkgrid' theme from seaborn. Assign the figure handle to QUESTION_12.

Question 13¶

Compute the excess kurtosis of daily, weekly (using Friday and the end of the week) and monthly returns on the 10 momentum portfolios using the pandas function kurt. The solution must be a DataFrame with the portfolio names as the index ordered form 1 to 10 and the sampling frequencies, 'daily', 'weekly', or 'monthly' as the columns (in order). When computing weekly or monthly returns from daily data, use the sum of the daily returns.

Question 14¶

Simulate a random walk using 100 normal observations from a NumPy RandomState initialized with a seed of 19991231.

Question 15¶

Defining

import numpy as np

cum_momentum = np.cumprod(1 + momentum / 100)

compute the ratio of the high-price to the low price in each month. The solution should be a DataFrame where the index is the last date in each month and the columns are the variables names.

Question 16¶

Simulate 100 observations from the model

where $\epsilon_i$ is a standard normal shock. Set $y_0=\epsilon_0$ and $y_1=\epsilon_0 + \epsilon_1$. The solution should be a 1-d NumPy array with 100 elements. Use a RandomState with a seed value of 19991231.

Question 17¶

What is the ratio of the largest eigenvalue to the smallest eigenvalue of the correlation matrix of the 10 momentum returns?

Note: This is called the condition number of a matrix and is a measure of how closely correlated the series are. You can compute the eigenvalues from the correlation matrix using np.linalg.eigs. See the help of this function for more details.

Question 18¶

Write a function that takes a single input 'x' and return the string "The value of x is " and the value of x. For example, if x is 3.14, then the returned value should be "The value of x is 3.14". The function name must be QUESTION_18.

Question 19¶

Compute the percentage of days where all 10 returns are positive and subtract the percentage of days where all 10 momentum returns are negative on the same day.

Question 20¶

Write the function QUESTION_20 that will take a single input s, which is a string and will return a Series that counts the number of times each letter in s appears in s without regard to case. Do not include spaces. Ensure the Series returned as its index sorted.

Hints:

• Have a look at value_counts for a pandas Series.
• You can iterate across the letters of a string using

some_string = 'abcdefg'
for letter in some_string:
    do somethign with letter...

• str.lower can be used to get the lower case version of a string