Statistics



Statistics

Discussion of Assignment Question 1

There are 3 securities which has been used in the analysis i.e. CBA share prices, ANZ share prices and WESPAC share prices of last 132 latest share prices. The market securities AORDS All ordinaries index has been taken. Further, to use CAPM, RBA (Australian three month interest rate of Government Bonds annual rate) was primarily taken as the core variable. Initially to make the data for these variables stationary, we have taken the logarithmic difference of the data and the logarithmic plot shows that how the data has become stationary.

The descriptive statistics were then measured to determine the central tendency of these variables i.e. an average percentage share price returns over the period of 132 observations. The standard deviations on the other hand shows that the log (returns) for these variables are slightly deviating as all the share price returns are deviating around 5% - 6% on average. The average returns for ANZ and WESPAC are found to be positive with WESPAC shows almost 1% return and ANZ shows almost 0.8% returns whereas CBA gives slightly negative returns i.e. -0.7% as a whole. The returns on the share prices are not very high but standard deviation shows that they are slightly more fluctuating. The minimum returns expected in all the 3 share prices were for CBA where it once shows an extreme decline of almost -180% whereas the highest returns were recorded for WESPAC i.e. almost 22%. This comparatively high fluctuation increases the standard deviations for all the 3 share prices. The box plot in the analysis shows that the median returns for CBA, WESPAC and ANZ were fairly close to each other i.e. the inner deviations are very close but there are few deviations which has disturbed the overall behavior of the share prices of these variables that is why the error bars are fairly high.

Covariance matrix shows that how much variations occur in any share price due to the change in the other share prices of WESPAC, CBA and ANZ. The highest covariance was observed for their own movements i.e. CBA, WESPAC and ANZ are comparatively highly affected by their own prices and not by the movements of other share prices respectively. Similarly, there is no significant correlation found between these share prices i.e. almost 2% - 26% relationship was found.

Further, the CAPM was used to analyze the impact of all ordinaries ...