Consider the monthly simple excess returns of Pfizer stock
and the S&P 500 composite index from January 1990 to December 2003. The
excess returns are in m-pfesp-ex9003.txt with Pfizer stock returns in the first
(a) Fit a fixed-coefficient market model to the Pfizer stock
return. Write down the fitted model.
(b) Fit a time-varying CAPM to the Pfizer stock return. What
are the estimated standard errors of the innovations to the _t
and _t series? Obtain time plots of the smoothed estimates of
_t and _t.