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Report On Analysis Of Stocks

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Added on  2020-03-16

Report On Analysis Of Stocks

   Added on 2020-03-16

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StatisticsNameUniversity6th October 2017
Report On Analysis Of Stocks_1
Table of ContentsIntroduction......................................................................................................................................3Methodology....................................................................................................................................3Descriptive statistics........................................................................................................................4Summary statistics.......................................................................................................................4Time series plots..........................................................................................................................4Hypothesis Test...............................................................................................................................7Testing whether the average return on Boeing stock is at least 3%.............................................7Comparison of risk associated with stocks..................................................................................8Comparison of average returns....................................................................................................9Estimating theCAPMusing linear regression...........................................................................10Confidence interval to test neutrality of stock...........................................................................11Testing normality of error term..................................................................................................12References......................................................................................................................................14
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IntroductionThis report presents analysis of four different stocks. The main aim is to give a comparison of thestocks in terms of volatility and risk. The research question we sought to answer is which of thefour stock would one choose? Data was downloaded from Yahoo Finance where the start timewas 01/12/2010 and the end time was 31/05/2016 (a total of 65 months were included foranalysis). The sample portion of the data is shown in table 1 below;Table 1: Sample portion of the dataClosing stockStock ReturnsDateS&P 500indexIBM Stock PriceUS TN (10 year)Boeing Stock PriceS&P 500 indexIBM Stock PriceUS TN (10 year)Boeing Stock Price12/1/20101257.640146.7603.30565.2601/1/20111286.120162.0003.37869.4802.2399.8802.1856.2662/1/20111327.220161.8803.41472.0103.146-0.0741.0603.5773/1/20111325.830163.0703.45473.930-0.1050.7321.1652.6314/1/20111363.610170.5803.29679.7802.8104.502-4.6827.6155/1/20111345.200168.9303.05078.030-1.359-0.972-7.757-2.2186/1/20111320.640171.5503.15873.930-1.8431.5393.480-5.3977/1/20111292.280181.8502.80570.470-2.1715.831-11.854-4.7938/1/20111218.890171.9102.21866.860-5.847-5.621-23.480-5.2599/1/20111131.420174.8701.92460.510-7.4471.707-14.220-9.97910/1/20111253.300184.6302.17565.79010.2315.43112.2628.366MethodologyData was presented in excel and then transformed for purposes of conducting analysis on it.Excel was used for analysis where the data analysis add in was heavily utilized. The stockreturns was computed using the following formula;
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rt=100ln[PtPt−1]We also computed excess return on the preferred stock asyt=rt−rf,tand excess marketreturn asxt=rM,t−rf,t(that is, wesubtracted the 10-year T-Bill rate from return on thepreferred stock and themarket return that is the return on S&P 500).Descriptive statisticsSummary statisticsMeasures of central tendency (mean and median) were conducted to see how the four stockscompare. Boeing stock had the highest average returns (M = 1.014) while US TN had the lowestaverage returns (M = -0.906). We also performed the measures of variation (standard deviationand range). US TN had the highest standard deviation (SD = 9.503) while S&P 500 index hadthe lowest standard deviation (SD = 3.386). This shows that S&P 500 index has the lowest riskwhile US TN is the riskiest stock of all the four stocks.Table 2: Descriptive statisticsS&P 500indexIBM StockPriceUS TN (10year)BoeingStock PriceMean0.7870.071-0.9061.014Standard Error0.4200.6271.1790.743Median1.044-0.0740.8211.200Standard Deviation3.3865.0529.5035.988Sample Variance11.46325.52590.31035.852Kurtosis0.5570.6550.5890.699Skewness-0.135-0.137-0.139-0.470Range17.67728.86651.50630.820Minimum-7.447-14.383-25.891-18.533Maximum10.23114.48325.61512.287Sum51.1254.646-58.89465.909Count65656565
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