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Finance Assignment Question
As a research officer you have been asked to summarise, analyse and interpret the data. Specific tasks include the following:
- Analysis of the weekly BHP closing prices
- Analysis of the general distribution of returns
- Analysis of the relationship, if any, between BHP and the All Ordinaries index returns
For each of the above components you should:
- Prepare a table and/or chart to summarise the data
- Analyse & interpret the data; noting any key features
Please note that part of this task is for you to assess which is the most appropriate table/chart to use for each section of analysis and in some cases this will mean that you need to try various options before making your final decision.
You are to prepare a report to summarise your findings.
Finance Assignment Solution
For analysis, data used was secondary data. The secondary data was collected from Yahoo Finance. The closing share price of BHP Billiton was used for this study. BHP Billiton is a listed company on the Australian Stock Exchange (Mann, Perm, 2013). The dataset consists of weekly closing share prices of BHP from the period 11/1/1999 to 31/12/2012. The dataset contains following information such as week ending, BHP closing price, all ordinaries index, BHP return, all ordinaries return.
- BHP Return
Table 1: Summary Statistics of BHP return
The average return on BHP was 0.003566. The standard error of the mean for BHP return was 0.00161. The observation the split the BHP return distribution in two equal half was 0.005891. The standard deviation for BHP return was 0.04349. The square of the standard deviation for BHP return was 0.001891. The distribution of BHP return was peakedness distribution as compared to a normal distribution; Kurtosis was 11.699. As the kurtosis value of BHP return falls under the interval [-0.5,+0.5], so it is considered that data have normal peakedness distribution. The positive value of 1.0476 for the sample research represents that the distribution of BHP return is positively skewed (Dodge, 2008).
The positive skew represents that the extension of the longer tail is toward the high values in the distribution. The range for BHP return can be calculated by subtracting the minimum value from the maximum value, which produces a range value equal to 0.58598. The lowest value of BHP return was -0.17045. The highest value of BHP return was 0.415525.
Figure 1: Trend Analysis of BHP return
- Index Return
Table 2: Summary Statistics of Index return
The average return on the index was 0.000924. The standard error of the mean for index return was 0.000786. The observation splits the index return distribution in two equal half was 0.003081. The standard deviation for index return was 0.0212343. The square of standard deviation for index return was 0.000451. The distribution of index return was peakedness distribution as compared to a normal distribution; Kurtosis was 6.09054.
As the kurtosis value of index, return falls under the interval [-0.5,+0.5], so it is considered that data have normal peakedness distribution. The negative value of -0.97344 for the sample research represents that the distribution of index return is negatively skewed (Armstrong, Scott, 2012). The negative skew represents that the extension of the longer tail is toward the low values in the distribution. The range for index return can be calculated by subtracting the minimum value from the maximum value,
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