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Statistics for Business and Economics

Instructions/Syntax for Term Paper Portfolio Analysis

In this project, you will apply the tools learned in EC-300 to a financial portfolio of your selection to determine whether it would be a good purchase. These need to be done on PC’s; MAC’s do not have sufficient capabilities for performing advanced statistical testing. This is a good learning lesson for students that they should become accustomed to; the ‘real world’ uses PC’s, not MAC’s.

In this project, you will make the following calculations:

Mean

Variance

Standard Deviation

Z-Score and Associated Probability

Confidence Interval

One Sample Hypothesis Test

Two Sample Hypothesis Test

Scenario

Suppose that you work for a consultancy group that provides advice on the stock market. A client has asked you to provide an analysis of a particular stock for his/her company (you are actually going to pick the stock, see below). What you will do is amass data from a financial website, utilize the various statistical techniques from the course, and author a ‘financial report’ no shorter than seven pages but no longer than twelve (double spaced, Times New Roman, size 12 font) that contains the statistical analysis you have performed, why you would perform that specific test, and your recommendation for the client. In particular, the report should discuss:

Why you selected the particular company

Financial and non-financial characteristics of the company

How you calculated the various statistics and what they are

The significance of the statistics (both numerically and what relevance the test has)

Conclusions based on research – Is the company a good one to purchase

FAQ’s/Concerns

Do I have to submit my excel work with the paper? No.

Are there any successful examples of this project? Yes, look on blackboard.

Do you want me to describe what I did step by step? Absolutely not. You are to discuss the relevance and significance of each statistical test and how it applies to your particular scenario. Then, you are to analyze what that test and its results say about your particular company.

What do you mean by significance of statistical tests? You need to discuss under what conditions and/or scenarios you might think to apply that particular test. In other words, discuss why is it relevant to the world. Simply stating “I decided to run a confidence interval…” is not acceptable; that does not actually happen. Instead, you would decide to run, say, a confidence interval because you “wanted to create a range of value likely to contain the population mean…”. Get into the liberal arts aspects of statistics where you become aware of when and why a specific tool should be used as well as what its limitations are.

Instructions for Data Collection

Pick a company that you are curious about/really like; you are going to work with this company’s stock for the next several weeks so make sure it is something you are interested in.

Go to Google.com and type in the company’s name, followed by “Ticker Symbol.” For example, if you wanted to look up Apple, you would type in “Apple Ticker Symbol”, which would come up at AAPL. The ticker symbol is the company’s identification code on the various financial markets.

Go to Morningstar.com. Where it says “Quote”, type in the ticker symbol. The company’s profile should then appear.

Click Performance, which is located in the toolbar in the middle of the screen.

Click Price History, which will be right underneath Performance.

Underneath “Historical Prices”, it should say “Date Range” and “Frequency”. For “date Range”, click on 1Y (stands for One Year) and under “Frequency” click on “daily”.

To the right of where it says “Frequency”, click on “Export”. This will download the data into Excel, which is the program we will be using to make calculations.

Organizing the Data

Once the data has been downloaded into Excel, hold down on the “CTRL” button and click on Columns B, C, D, and F.

In this order, hit the buttons “Alt”, then the letter “E”, then the letter “D”, then “Enter”. You should be left with only the Dates in Column A, and the Column that says “Close” (which is the price of the stock when the market closed) in Column B.

The Arithmetic Mean

In Cell D3, type in “Arithmetic Mean” and hit “Enter”. Then type in “=average(” and use the Arrow Directional Keys to move the cursor over to Cell B3.

Once you have done that, hold down the “Shift” key while you hit “End” (it’s over by the “Backspace” key), and then hit the “Down” arrow. Type in a “)” (the symbol for a Closed Parenthesis), and hit “Enter”. That is the average price of the stock.

The Standard Deviation

In Cell E3, type in “Population Standard Deviation” and hit “Enter”. Then type in “=stdev.s(” and use the Arrow Directional Keys to move the cursor over to Cell B3. Once you have done that, hold down the “Shift” key while you hit “End” (it’s over by the “Backspace” key), and then hit the “Down” arrow. Type in a “)” (the symbol for a Closed Parenthesis), and hit “Enter”. That is the population standard deviation of the price of the stock.

It is the number that corresponds to the Greek Letter sigma.

Variance

In Cell F3, type in “Population Variance” and hit “Enter”. Then type in “=var.s(” and use the Arrow Directional Keys to move the cursor over to Cell B3. Once you have done that, hold down the “Shift” key while you hit “End” (it’s over by the “Backspace” key), and then hit the “Down” arrow. Type in a “)” (the symbol for a Closed Parenthesis), and hit “Enter”. That is the population variance of the price of the stock.

It is the number that corresponds to the Greek Letter sigma squared.