Analysis of Johnson and Johnson Stock on NYSE

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Geeta

Contents
Task A..........................................................................................................................................................3
Task B..........................................................................................................................................................8
Bibliography...............................................................................................................................................11

The stock given for this assignment in Johnson and Johnson on NYSE and the sub-period given is
numbers 241 to 480. Thus, the observation period is January 1984 to December 2003.
Task A
1) Vaariable Rf denotes the return on a 1 month Treasury Bill and is the most stable
indicator of returns. This is the estimated return on the bond and serves as the expected
return on the stock
Using the Asset Pricing Model, we derive the price returns as follows
r = Rf + BiRmRf
In order to derive the logarithmic returns, the returns on price levels were transformed using
the log function.
Table 1: Descriptive Statistics for prices and price Returns
JNJ LN_PRICE...
Mean 66.56687 0.001244
Median 63.55500 0.014061
Maximum 114.5000 0.172328
Minimum 29.25000 -0.772330
Std. Dev. 20.06444 0.113122
Skewness 0.252545 -3.912957
Kurtosis 1.923759 25.17210
Jarque-Bera 14.13411 5505.435
Probability 0.000853 0.000000
Sum 15976.05 0.297278
Sum Sq. Dev. 96217.04 3.045613
Observations 240 239

Neither the prices nor the price returns are normally distributed. The prices are skewed
towards the right whereas the logarithmic returns are skewed towards the left. However, prices
aren’t skewed greatly since the skewness statistic is close to zero.
The kurtosis for the prices are less than 3, implying the data has less dense tails while the
kurtosis figures of the returns show that the data has very dense and heavy tails.
2) The Time Series Plots are as follows:
20
40
60
80
100
120
1984 1986 1988 1990 1992 1994 1996 1998 2000 2002
JNJ
Figure 1 Price Levels