Applied Statistics Group Project:
Common Stock Return Analysis
Math 112
Professor Frank Seres
Between 2-3 people in a group!
Measurement of the return on a company stock is an integral part of the market evaluation of the overall performance of the company. In the absence of dividends, stock splits, or other financial adjustments, the return on a company’s common stock is defined as the change in price during a specified period divided by the price at the start of the month. Although an examination of monthly returns is usually concerned with monthly data, the concept also applies to information gathered for shorter or longer intervals.
Thus, if a stock’s price at the start of the month is $50 and it increases to $51 at the end of the month, the return is (51 – 50)/50 = 0.020, or 2.0 percent. If it decreases from 51 to 49 the following month, the return is (49 – 51)/51 = -0.039, or –3.9 percent. Hence, returns over a given period are essentially proportional or percentage changes in price.
Your goal in this project is to choose a publicly traded firm in which you are interested, either for investment or employment reasons. The report must be written and presented in a manner suitable for presentation to a present or future employer.
You should begin by obtaining weekly stock returns on the firm that you have chosen. Obtain return data going as far back as possible, and also obtain data on subsequent weeks through this semester.
As part of this project, you should have the following headings:
Introduction: Describe your model and review your model’s goals and objectives. This should include a background on the firm, reasons why you have chosen a specific firm and any concerns you might have about your choice. You might also want to give a brief history of the financial highlights of the firm.
Research Objectives: State why you are focusing on the firm and how the research will assist you.
Benefits of Conducting the Research: Subtopics might include:
- To identify trends in the stock’s evaluation
- To assist you in buy-sell decision making
- To improve your understanding of the financial performance of the firm
Research Design: This should describe what you are doing. You will be gathering statistical data on your chosen firm and will be sorting the data accordingly. By compiling and analyzing the data, you will be attempting to answer your research objectives.
Analysis Techniques: This should include a description of the analysis techniques that you used. Possibilities include:
- Time Series Plots of your chosen firm and a comparable index
- Bar and Line Graphs
- Pareto Charts
- Measures of Central Tendency
- Standard Deviation
- Regression Analysis
- Coefficient of Correlation
- Coefficient of Determination
- Hypothesis Testing
- Linear regression ( new)
Analysis and Interpretation: This could possibly include:
- Data interpreted
- Areas of Concern that are identified
- Recommendation made
Summary and Reflection
Your report will be at least 2 pages long, double spaced, 12 point font, counting text only. With the tables and graphs, it will be quite a bit longer. Your report must be well written, in formal style, and clearly and completely discuss your subject. BE FOREWARNED: If your report is skimpy and shows little evidence of serious thought, you'll get a bad grade. Include several illuminating graphs these should represent any important findings you come across that were instrumental in building your model.
To get started,
- Pick a company and gather some historical stock price data. Use an Excel statistical package or use STATDISCK and graph a time series plot of your companies stock’s return. Explain the plot.
- Use a Histogram to examine the situation with respect to the return of your chosen firm.
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(Below is new)
For linear regression:
-Download S&P 500 from yahoo finance the ticker symbol is ^GSPCfor the same length of time as your choice of stock.
-Run a correlation test, and find a least square line (regression line) btw your stock and S&P 500. What is your r-squared?