FINC5090 Group Assignment Instruction S1 2024
1. Due Date
Sunday 12 May 2024 23:59.
2.Academic Honesty
This is a group assignment where students are expected to work collaboratively in-group on the assignment tasks. The similarity of assignment answers will be checked in Turnitin. Any plagiarism, collusion and other dishonest conduct will be penalised subject to the university
Academic Integrity Policy. You are highly recommended:
. to keep your workings beyond the access of any students in other groups,
. not to share your document by any means with any other groups,
. not to attend any private tutoring sessions on this assignment and
. not to use any assignment help services from a third party.
The FINC5090 teaching team is keen to help. Please do not hesitate to contact tutors and lecturers for support.
3. Generative AI
Under the Academic Integrity Policy 2022, students cannot ‘inappropriately use digital or information technology to complete an assessment task, including generating content using artificial intelligence; or using paraphrasing or translation software to disguise plagiarism, collusion, contract cheating or other academic integrity breach.
As a typical example, an allowed use of these technologies might be to help improve the grammar of your draft assignment. A disallowed use of these technologies would be to draft the entire content of answers to the questions that you are required to write yourself.
Generative AI is not a reliable or reproducible source of information, unlike a journal article or even webpage. Another person cannot obtain the same completion you did, even if they use the same prompt. Therefore, in this assignment, you are not allowed to quote AI-generated text as references.
For more information regarding generative AI and how to ethically use AI tools in your learning, please visit AI in Education.
4. Assignment Tasks
The objective of this assignment is to conduct an empirical test on three key international parity conditions: the Un-covered Interest Rate Parity (UIP), the Relative Purchasing Power Parity (PPP), and the Real Interest Rate Parity (RIRP).
Task 1 International parity conditions (8 marks).
a. Provide an overview of three parity conditions: the UIP, the PPP and the RIRP and their respective functions in determining exchange rate movements.
b. Discuss the relationships among the three conditions.
c. Provide a brief review of academic literature regarding the validity of the UIP and the PPP. To what extent do the UIP and/or PPP forecast exchange rate movements accurately?
Task 2 Currency selection, data collection and methodology (8 marks).
a. Choose a pair of currencies for your empirical study. Ensure that one currency is the Australia dollar (AUD) and another is from one OECD country. Justify your selection based on factors such as economic relevance, availability of data, and interest rates
differentials.
b. Collect historical data on exchange rates, interest rates, and inflation rates for the chosen currency pair. Introduce the data and data resources. Describe any processes that you've followed to convert the raw data into measures to be used in the empirical tests. Your study should be performed over a sample period from January 2010 to December 2023.
c. Describe the methodologies for testing the UIP and PPP. You have two choices:
. Regressions: In this case, display the equations for your regressions, define the variables, explain how each variable is measured and state what results one should expect if the UIP and PPP are valid.
. Forecasting error analysis: In this case, explain how to forecast exchange rates using the UIP and PPP. Explain what measures should be used to determine the forecasting accuracy.
Task 3 Empirical test results (10 marks).
a. Display the empirical results that you've obtained following the methodologies as specified in Task 2 (c). The results should be displayed in a table. Make sure that the table is clearly labelled so that readers directly understand the information without referring to the text of your report.
b. Explain and discuss the results displayed in Part (a). To what extent your results indicate the validity of the UIP and PPP?
c. Calculate the real exchange rate for each quarter in your sample period and display the results using a line chart. Is the real exchange rate a constant? Discuss the implications of the changes in the real exchange rate over the sample period.
Task 4 Discussions and conclusions (8 marks).
Discuss any possible reasons behind deviations of the actual exchange rate from theoretical expectations formed based on the UIP and PPP. Are your findings consistent with the existing literature? Draw conclusions regarding the validity of each parity condition for the selected currency pair.
Overall quality and referencing (6 marks)
Maximum length of assignment: We expect a reasonably presented assignment to have around 2000 to 2500 words excluding the title page, reference list and appendix. 5 marks will be deducted for every 100 words exceeding the word limit. For example, you will lose 5 marks if your report has 1999 words or 2501 words.
Formatting requirements: 1.5 line spacing 2 cm margins, 12pt font size, Times New Roman and Arial are both acceptable.
Tables and figures should be clearly labelled. Penalties apply for poorly presented work. You must display the required tables and graphs in the body of the report. You will NOT receive any marks if you put tables and graphs in appendix just in order to satisfy the word limit.
You are not required to present the answers in a formal report format. However, you must label your answers to each part of the tasks clearly. (e.g. Task 1, Task 2, a. b., etc.). You can attach the complete Excel calculations to the report as appendix. You can also add other less important results in Appendix.
Referencing: You are expected to use academic references to support your analysis and arguments. Citations and the reference list must be prepared using APA 7th or Harvard referencing styles (https://libguides.library.usyd.edu.au/citation).
Writing: The logic of the answers must be easy to follow. There are expected to be no spelling or grammatical errors and terminology should be clearly defined.
5. Marking Criteria
The criteria below will be followed when marking each part of the assignment (including in assessing the overall quality of the report):
i. The extent and quality of critical reasoning/critical thinking
ii. The demonstration of knowledge of relevant theory.
iii. The successful usage and interpretation of relevant data
iv. The extent to which the work is clearly and concisely presented.
Weight of Final Mark: This assignment will be marked out of 32 marks and will be scaled to account for 25% of course total mark.
6. Submission
i. Each group should submit only one copy of assignment. Group leaders are expected to submit the assignment on behalf of the group.
ii. The only acceptable form. of submission is electronic via the submission link in the unit’s Canvas site. Hardcopy and email submissions will NOT be accepted. Late submissions will be penalised according to assessment policy. All submission will be checked through TURNITIN for similarity with external sources.
iii. Submission format: Only a PDF format document will be accepted, and it is your responsibility to ensure all pages correctly display your original content. Missing or distorted figures and formulas will result in lower marks.
iv. Cover page: Ensure the Student Identification Numbers (SIDs) are on the cover page of your assignment. The names of student must NOT show up on the assignment to ensure the anonymous marking requirement. The cover page should be submitted with the assignment in a single file (as the front page).
v. Document name: Your project PDF file must be named in the following format:
FINC5090_group number_2024.PDF Example: FINC5090_group201_2024.PDF.