Testing interest-rate returns for normality
The object zcbx_m
contains monthly log-return series for the 1-year, 5-year and 10-year Canadian zero-coupon bond yields. The object zcbx2_m
contains the corresponding simple returns. Both are multivariate; they are loaded into your workspace.
In this exercise, you will plot these interest rate return series and then examine their normality with Q-Q plots and Jarque-Bera tests.
The log-returns show clearer evidence of non-normality than the simple returns in this case.
This exercise is part of the course
Quantitative Risk Management in R
Exercise instructions
- Plot
zcbx_m
andzcbx2_m
with the appropriate plotting function and the parametertype = "h"
. - Use brackets for indexing and
qqnorm()
to create Q-Q plots of the 3rd component series ofzcbx_m
andzcbx2_m
. - Use
apply()
to compute the kurtosis of each component series inzcbx_m
andzcbx2_m
. - Use
apply()
to conduct the Jarque-Bera test on each component series inzcbx_m
andzcbx2_m
.
Hands-on interactive exercise
Have a go at this exercise by completing this sample code.
# Plot the interest-rate return series zcbx_m and zcbx2_m
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# Make Q-Q plots of the 3rd component series of zcbx_m and zcbx2_m
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# Compute the kurtosis of each series in zcbx_m and zcbx2_m
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# Conduct the Jarque-Bera test on each series in zcbx_m and zcbx2_m
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