Analysis of Share Price Variance: Intu Properties PLC Finance Report

This report provides a comprehensive analysis of the share price variance of Intu Properties PLC, a UK Real Estate Investment Trust (REIT), using data from September to November 2019. The study aims to predict share prices and understand price fluctuations. The methodology involves calculating ...Read More

Report

Table of Contents
INTRODUCTION 1
MAIN BODY 1
Calculation 3
Result and discussion 5

INTRODUCTION
A well-maintained portfolio is considered as the vital aspect for success of investors in
today’s financial marketplace. Such portfolio should meet the future capital requirements where,
for consistent long-term growth of investment, it is essential for investors to determine the asset
allocation in appropriate manner, by aligning it with goals and risk tolerance. Further, the next
step is to pick individual assets then monitor diversification of portfolio and make adjustments if
necessary. In this regard, to prepare a portfolio, the first company which is chosen here is Intu
Properties PLC. It is one of the Real Estate Investment Trust (REIT) of the UK, which is
majorly focused on management and development of shopping centres. This firm has owned
more than 17 shopping centres in Britain and three in Spain. Along with this, its shares are also
listed on Johannesburg and London stock exchange. In this regard, determining its investment
rates, it has been identified that founders of this company viz. John Strachan (Chairman), John
Whittaker (DC) and David Fischel (CEO) are considered as the successful investors of UK.
Therefore, selecting this firm for present report will help in addressing the main requirements, in
a better way. This requirement is to investigate the variance of prices between companies. Under
the present report, the main aim is to predict the share price of upcoming days in the stock
market, therefore, to analyse this, the decision to choose Intu Properties Plc is considered as an
effective one, because it is one of the well-known trader firms of the UK. So, finding or
assuming its share price would be more easy then others.
To analyse the variance of share price, data and corresponding share is chosen from weeks
of Monday 30 Sept.2019 to Monday Nov.2019. For investigating the variance of price, predicted
value of share price will be compared with actual price under this report, by utilising the
statistical methods and techniques. Based on such methods, like variance and correlation,
relationship will determine between actual and predicted share price.
MAIN BODY
Data about share price on corresponding dates i.e. from Monday 30 Sept.2019 to Monday
Nov.2019, of Intu Properties PLC is assumed as actual price (X) as shown in below table. While
predicted value is calculated by taking an aggregated value of three days i.e. average of three
dates. This method is also known as moving average mainly used for smoothing out the price
actions via filtering out the ‘noise’ from fluctuations of short-term price. As this method is based
1

on past price, therefore, in context with the present project which is based on share price from
some months of 2019, so, using the moving average method helps in identifying the trend
direction by providing greater weight to recent prices. For predicting trends of share price in
stock market, from common time periods to 15, 20, 30, 50, 100 and even 200 days. It would help
in generating a trading signal for traders also.
Share Price Data of Intu Properties Plc
Opening
Intu
Proprieties
PLC Square of x Square of y
X Y XY
9/30/2019 738
10/7/2019 716 715.00 511940 512656 511225
10/14/2019 691 693.87 479461.8667 477481 481450.9511
10/21/2019 674.6 682.27 460257.0933 455085.16 465487.8044
10/28/2019 681.2 684.80 466485.76 464033.44 468951.04
11/4/2019 698.6 691.67 483198.3333 488041.96 478402.7778
11/11/2019 695.2 688.47 478622.0267 483303.04 473986.3511
11/18/2019 671.6 674.33 452882.2667 451046.56 454725.4444
11/25/2019 656.2 442.60 290434.12 430598.44 195894.76
total 5484.4 5273 3623281.467 3762245.6 3530124.129
Taking data of Intu Properties Plc (X) and using the moving average method as arithmetic
mean of three past prices, helps in obtaining a trend line (Y) between actual and predicted value
of share on chosen dates in following way -
y = -23.56 x + 765.14
This trend line or linear regression can be used to predict the future values of share price in
stock market.
2

1 2 3 4 5 6 7 8
0.00
100.00
200.00
300.00
400.00
500.00
600.00
700.00
800.00 715.00693.87682.27684.80691.67688.47674.33
442.60
f(x) = − 23.5595238095238 x + 765.142857142858
Intu Properties PLC
Weekly
Share Price
Now, to investigate the variance between share price and relationship between actual and
predicted value, variance and correlation methods are used. Variance helps in measuring how far
a set of data is spread where if variance is calculated as zero that values are identical. While, a
small variance depicts that the data points tend to be much close to mean, as well as to each
other. On contrast, if there will be a high variance then it indicates that all data points of a set are
much spread out from each other and from the mean also. Variance thus, can be defined as
an average of squared distances of a set of data from each point to the mean. Another method
used to determine relationship between two variables is coefficient of correlation. The value
calculated by using Pearson’s correlation coefficient always lies between -1 and 1, where -1
indicates negative relationship and 1 strong positive relationship. other than this, if its value is
zero then there will be no relationship between two sets of data variables. In the given stock
value of share price, the both variance and correlation of coefficient is calculated in following
manner –
Var (X) = 1 [n ƩX2 – (ƩX)2]
n2
= 1 [ 8 x 3762245.6 – (5484.4)2]
82
= 1/64 x [30097964.8 – 30078643.4]
= 1/64 x 19321.4
3

≈ 301.89
Var (Y) = 1 [n ƩY2 – (ƩY)2]
n2
= 1 [ 8 x 3530124.129 – (5273)2]
82
= 1/64 x [28240993 - 27804529]
= 1/64 x 436464
≈ 6819.75
Result and discussion
From the above calculation, it has been identified that there is a strong relationship between
actual and predicted value of share price, offered by investors of Intu Properties Plc in the given
period of Monday 30 Sept.2019 to Monday Nov.2019. While, by calculating variance, it has
been identified that data points of these corresponding dates, are highly spread out from mean as
well as from each other.
4

REFERENCES
Books and Journals
Kimball, M.S., Shapiro, M.D., Shumway, T. and Zhang, J., 2019. Portfolio rebalancing in
general equilibrium. Journal of Financial Economics.
Aït-Sahalia, Y. and Matthys, F., 2019. Robust consumption and portfolio policies when asset
prices can jump. Journal of Economic Theory. 179. pp.1-56.
Henriksson, R., Livnat, J., Pfeifer, P. and Stumpp, M., 2019. Integrating ESG in portfolio
construction. The Journal of Portfolio Management. 45(4). pp.67-81.
5