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Quantitative Methods

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Introduction

In this Assignment I choose to analyse the following three stocks: Johnson and Johnson DC (JNJ), Hewlett Packard CO (HPQ) and American Express INC (AXP). The data I use is based on the monthly average stock for 30 consecutive months from 31/12/2003 to 31/05/2006.

Q1 This Assignment shall first begin with an individual statistical description of each series.

Johnson and Johnson DC

The graph below show the share price fluctuation during that period:

image00.png

From the graph above it demonstrates that Johnson and Johnson’s share price average highest on 29/04/2005, and lowest on 31/03/2004. After the share peak on 29/04/2005, the share started to drop and fluctuate a bit. However, it seems that the share price of Johnson and Johnson began to pick up on the 31/01/2006, and its share price 60.22 is higher than the beginning of the sample (51.66).

Johnson and Johnson

Mean

59.78333333

Standard Error

0.882586759

Median

59.66

Mode

#N/A

Standard Deviation

4.834126768

Sample Variance

23.36878161

Kurtosis

-0.890698478

Skewness

-0.015033442

Range

17.91

Minimum

50.72

Maximum

68.63

Sum

1793.5

Count

30

The table above is a descriptive statistic of the Johnson and Johnson’s stock during the period using Microsoft Excel. In here, because the mean (59.78333333) is very close to the median (59.66), the points on the distribution appear approximately symmetrical. We can assume that the distribution is very close to a normal distribution. The standard deviation describes how the share prices cluster around the mean. In here, the standard deviation is relatively small which indicates that the share price is stable during this period.

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Middle

Minimum

17.89

Maximum

32.9

Sum

729.25

Count

30

The mean of the share prices is higher than its median, which indicates right-skewness. It means that most of the values are in the lower portion of the distribution. This distortion is caused by some extremely large values in the sample. The maximum of the sample is 32.9 and the minimum is 17.89 (see table above.) The positive skewness means that the distribution is right-skewed and that most values cluster around the lower portion with the exception of some large values. These large values pull the mean upward so that the mean is greater than the median. The negative kurtosis means that the distribution is “flat.” The standard deviation is similar compared to Johnson and Johnson’s shares in this report, but Hewlett Packard’s share price has been fluctuated a little bit. General speaking, Hewlett Packard’s share price has been relatively stable during the period with a hint of future increases.

American Express

image02.png

Compared to Hewlett Packard, American Express doesn’t fluctuate as much as Hewlett Packard. Again it fluctuates a little bit from the period 31/12/2003 until a quite low point 44.9666 on 31/03/2005. Then the share price begins to peak up and continuously grow until the highest mark 54.36 during the month of 31/05/2006.

American Express

Mean

47.82454

Standard Error

0.627728882

Median

46.9493

Mode

#N/A

Standard Deviation

3.438212689

Sample Variance

11.8213065

Kurtosis

-0.813769015

Skewness

0.42645752

Range

12.142

Minimum

42.218

Maximum

54.36

Sum

1434.7362

Count

30

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Conclusion

For American express I would suggest to “sell” the share because its share is now at its highest point (concluded from the American Express graph). So it’s wise to sell it now. In addition, information from London exchange market indicates that American express’s shares are decreasing from June 2006 to September 2006, a little increase from September to December 2006, afterward it towards decreasing direction. Generally in 2007, American express is the weakest stocks in the Dow Jones industrial.

Moreover, I would also like to consider the possibility of share portfolio. As I have indicated before Johnson & Johnson and Hewlett Packard make a fairly okay portfolio.

Bibliography

Books

  • Mark L. Berenson, et al., “Basic Business Statistics” (New Jersey: Pearson Prentice Hall, 2004), 89.
  • James C. Van Horne and John M. Wachowicz “Fundamentals of Financial Management” twelfth edition (Pearson Prentice Hall, 2003)

Websites

  • Engineering Statistics Handbook [on-line]; available from http://www.itl.nist.gov/div898/handbook/eda/section3/eda35b.htm; Internet; accessed 17th of April 2007.
  • Engineering Statistics Handbook, available from

http://www.itl.nist.gov/div898/handbook/eda/section3/eda35b.htm; Internet;

Accessed 18th of April 2007

http://www.ft.com/cms/s/0/57756d66-0021-11dd-825a-000077b07658.html


[1]Engineering Statistics Handbook [on-line]; available from http://www.itl.nist.gov/div898/handbook/eda/section3/eda35b.htm; Internet; accessed  19April 2007.

[2] Mark L. Berenson, et al., Basic Business Statistics (New Jersey: Pearson Prentice Hall, 2004), 89.

[3] Engineering Statistics Handbook, http://www.itl.nist.gov/div898/handbook/eda/section3/eda35b.htm.

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