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TABLE OF CONTENT
PAGE
1.0 Introduction 3
2.1 Task 1
Data Presentation
b) Descriptive Statistics 14
2.2 Task 2
b) Linear Regression 51
i) Scatterplot 55
2.3 Task 3 65
2.4 Task 4 66
1. INTRODUCTION
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In this report, an analysis will be done on the history prices of 5 stock markets that is
FTSE-100 (UK), Dow Jones (USA), DAX (German), Shanghai Composite and Nikkei
(Japan). The analysis will be done by using data presentation in a form of relative
frequency distribution, it will all be review using mean, media, mode and standard
deviation as well as the relationship between the data from the 5 markets using
correlation and regression.
2.1 TASK 1
DATA PRESENTATION
The data given are the historical prices of the stock on 5 markets that is FTSE-100
(UK), Dow Jones Industrial average, German DAX, Shanghai Composite and Nikkei
between 15th of September to 8th of December 2009. Each market consists of 61 data
and it has been shown in a group data and relative frequency distribution form. Relative
frequency distribution is “a tabular summary of a set of data showing the relative
frequency of items in each of several non-overlapping classes. The relative frequency is
the fraction or proportion of the total number of items belonging to a class”
(Stastitics.com 2004). The graphing of histogram are using relative frequency rather
than frequency. The relative frequency is “the ratio of the number of times an event
occurs to the number of occasions on which it might occur in the same period”
(dictionary.com 2010). Each data will be arranged into a group data and each of it has
its own frequency that is the time of occurrences for each data (electrical-res 2009).
i) FTSE-100 (UK)
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This is the result of group data for FTSE-100 (UK) when it has been rearrange with the
relative frequency:
Total 61 1.000
As for the relative frequency distribution, this is the result of the FTSE-100 (UK)
presentation when the mid point of group data has been implemented:
4
ii) Dow Jones Industrial (USA)
This is the result of group data for Dow Jones Industrial (USA) when it has been
rearrange with the relative frequency:
Total 61 1.0000
As for the relative frequency distribution, this is the result of the Dow Jones (USA)
presentation when the mid point of group data has been implemented:
6
iii) DAX (German)
This is the result of group data for DAX (German) when it has been rearrange with the
relative frequency:
7
5550-5600 3 5600 5550 5575 0.0492
Total 61 1.0000
As for the relative frequency distribution, this is the result of the DAX (German)
presentation when the mid point of group data has been implemented:
8
This is the result of group data for Shanghai Composite (China) when it has been
rearrange with the relative frequency:
Total 61 1.0000
As for the relative frequency distribution, this is the result of the Shanghai Composite
(China) presentation when the mid point of group data has been implemented:
9
v) Nikkei (Japan)
This is the result of group data for Nikkei (Japan) when it has been rearrange with the
relative frequency:
61 1.0000
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As for the relative frequency distribution, this is the result of the Nikkei (Japan)
presentation when the mid point of group data has been implemented:
b) Descriptive Statistics
In a business, descriptive data are often use in order to “summarize a collection of data
in a clear and understandable way but do not infer the properties of the population from
which the sample was drawn” (Business Dictionary 2010) There are two types of
descriptive statistics calculation and that is measures of central tendency and measures
of dispersion (Wui, Chye, Kar and Hai 2003. In order to calculate the central value of the
data, descriptive statistics such as mean, mode and median are compulsory to be used
(Wui, Chye, Kar and Hai 2003).
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Mean: The mathematical and statistics of average value of a set of data.
(Cherry 2010)
Formula:
Median: mathematical result that indicates that one half of the group is higher and one
half lower (Kimmons J. 2010)
Formula:
Mode: surveillance which occur the occasionally number of times compared to the
others (Wui, Chye, Kar and Hai 2003).
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Meanwhile, there are certain descriptive statistics such as standard deviation are used
to ascertain the distribution and differences between each pair of data inside the set of
data (Wui, Chye, Kar and Hai 2003). Standard deviation is “a measure of the extent to
which numbers are spread around their average” (Investorwords 2010).
Formula:
Σ= the sum of
= mean
Shangai
Composite 3054.58 3038.27 2950-3000 164.23
9800-9850,
10016.3 10200-10250,
Nikkei (Japan) 9977.08 9 10250-10300 329.34
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2.2 TASK 2
Formula: r
In order to search and measure the correlation and coefficient of determinants of the
data, each of the stock value was pair up. The data are consist from 5 stock value that
is FTSE-100 from United Kingdom, Dow Jones from USA, DAX from German, Shanghai
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Composite from China and Nikkei from Japan. Each of it can make up for 10 pairs.
Hence, the linear relationship can be measured between data of the 2 stock values.
x = FTSE-100 (UK)
x y x² y² Xy
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5230.50 10226.94 27358130.25 104590301.76 53492009.67
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5133.90 9742.20 26356929.21 94910460.84 50015480.58
Hence,
x= FTSE-100 (UK)
y= DAX (German)
x y x² y² xy
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5223.10 5688.58 27280773.61 32359942.42 29712022.20
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5080.40 5496.27 25810464.16 30208983.91 27923250.11
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5164.00 5731.14 26666896.00 32845965.70 29595606.96
Hence,
x= FTSE-100 (UK)
x y x² y² xy
5223.10 3331.90 27280773.61 11101557.61 17402846.89
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5322.40 3269.75 28327941.76 10691265.06 17402917.40
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5191.70 3070.59 26953748.89 9428522.95 15941582.10
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5042.10 2714.97 25422772.41 7371062.10 13689150.24
Hence,
x= FTSE-100 (UK)
y=Nikkei (Japan)
x y x² y² xy
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5251.40 9549.47 27577201.96 91192377.28 50148086.76
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5210.20 9799.60 27146184.04 96032160.16 51057875.92
Hence,
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v) Dow Jones (USA) and DAX (German)
y= DAX (German)
x y x² y² xy
10,285.97 5,688.58 105,801,178.84 32,359,942.42 58,512,563.22
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10,332.44 5,663.15 106,759,316.35 32,071,267.92 58,514,157.59
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9,864.94 5,783.23 97,317,041.20 33,445,749.23 57,051,216.96
Hence,
Correlation coefficient for DOW Jones (USA) and DAX (German), r = 0.4566
Coefficient of determination for DOW Jones (USA) and DAX (German), r² = 0.2085
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vi) Dow Jones (USA) and Shanghai Composite Index
x y x² y² xy
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10,005.96 3,114.23 100,119,235.52 9,698,428.49 31,160,860.81
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9,665.19 3,033.73 93,415,897.74 9,203,517.71 29,321,576.86
Hence,
y= Nikkei (Japan)
x y x² y² xy
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10,366.15 9,977.67 107,457,065.82 99,553,898.63 103,430,023.87
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10,081.31 10,333.39 101,632,811.32 106,778,948.89 104,174,107.94
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610,447.83 608,601.67 6,113,915,876.81 6,078,573,397.08 6,087,122,199.31
Hence,
Correlation coefficient for DOW Jones (USA) and Nikkei (Japan), r = -0.5921
Coefficient of determination for DOW Jones (USA) and Nikkei (Japan), r² = 0.3506
x= DAX (German)
x y x² y² xy
5,688.58 3,331.90 32,359,942.42 11,101,557.61 18,953,779.70
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5,787.61 3,275.05 33,496,429.51 10,725,952.50 18,954,712.13
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5,716.54 2,838.84 32,678,829.57 8,059,012.55 16,228,342.41
Hence,
x= DAX (German)
y= Nikkei (Japan)
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x y x² y² xy
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5,430.82 9,891.10 29,493,805.87 97,833,859.21 53,716,783.70
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5,709.38 10,202.06 32,597,019.98 104,082,028.24 58,247,437.32
Hence,
y= Nikei (Japan)
x y x² y² xy
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2,936.19 10,060.21 8,621,211.72 101,207,825.24 29,538,688.00
Hence,
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Coefficient of determination for Shanghai Composite and Nikkei, r² = 0.2108
b) Linear Regression
Linear Regression is often use to organize a data. It often used by the organisation to
set a predetermined value of how the stock varies every period of time (Trade Ideas
2010). Hence, linear regression is defined as a technique for finding the straight line
that best-fits the values of a linear function, plotted on a scatter graph as data points. If
a 'best fit' line is found, it can be used as the basis for estimating the future values of the
function (BusinessDictionary 2010).
The linear regression line is often written in a form of linear equation that is
In order to find the value of a and b. Certain formula must use to calculate the value of a
and b that is:
a= -b
Where:
n = number of pairs
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= mean for y value
x= FTSE-100 (UK)
y = -3174.462+2.537x
x= FTSE-100 (UK)
y= DAX (German)
y = 824.45+0.934x
x= FTSE-100 (UK)
y= Shanghai Composite
y = -2577.2+1.084x
x= FTSE-100 (UK)
y= Nikkei (Japan)
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y = 17577.775-1.463x
y= DAX (German)
y = 3798.245+0.188x
y= Shanghai Composite
y = -1560.337+0.461x
y= Nikkei (Japan)
y = 16766.848 -0.678x
x= DAX (German)
y= Shanghai Composite
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y = 2011.071+0.184x
x= DAX (German)
y= Nikkei (Japan)
y = 10768.798-0.139x
x= Shanghai Composite
y= Nikkei (Japan)
y = 12789.611-0.921x
i) Scatterplot
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i) FTSE-100 (UK) and Dow Jones (USA)
From the scatterplot above, it shows that there are positive relation between FTSE-100
(UK) and Dow Jones (USA). It shows a strong positive correlation where r = 0.7147.
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From the scatterplot above, it shows that there are spositive relation between FTSE-100
(UK) and DAX (German). It shows a strong positive correlation as well where r =
0.7572.
From the scatterplot above, it shows that there are positive relation between FTSE-100
(UK) and Shanghai Compsite. It shows a strong positive correlation as well where r =
0.6321.
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From the scatterplot above, it shows that there negative relation between FTSE-100
(UK) and Nikkei (Japan). It shows a partial negative correlation as well where
r = -0.4253.
From the scatterplot above, it shows that there positive relation between Dow Jones
(USA) and DAX (German). It shows a partial positive correlation as well where r =
0.4566.
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From the scatterplot above, it shows that there positive relation between Dow Jones
(USA) and Shanghai Composite. It shows a strong positive correlation as well where r =
0.8070.
From the scatterplot above, it shows that there negative relation between Dow Jones
(USA) and Nikkei (Japan). It shows a partial negative correlation as well where
r = -0.5920.
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From the scatterplot above, it shows that there positive relation between DAX (German)
and Shanghai Composite. It shows a small partial positive correlation as well where r =
0.0174.
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From the scatterplot above, it shows that there negative relation between DAX
(German) and Nikkei (Japan). It shows a small partial negative correlation as well where
r = -0.05.
From the scatterplot above, it shows that there negative relation between Shanghai
Composite and Nikkei (Japan). It shows a partial negative correlation as well where
r = -0.4091.
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ii) LINE CHART
Line chart is an option term for line graph (Business Dictionary 2010). This the result on
line chart that plot with the data of the 5 stock market values.
i) FTSE-100 (UK)
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iii) DAX (German)
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v) Nikkei (Japan)
2.3 TASK 3
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SUBSTITUTION VALUE
Using the linear regression between FTSE-100(UK) and Dow Jones (USA) that is:
y = -3.174.462+2.537x where:
x= FTSE-100 (UK)
5400, 5478, 5389, 5000, 5904 then the value of Dow Jones (USA) are:
y=
-3174.462+2.537(5400)
5400 y = 9510.538
y=
-3174.462+2.537(5478)
5478 y = 10723.224
y=
-3174.462+2.537(5389)
5389 y = 10497.431
5000 y=
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-3174.462+2.537(5000)
y = 9510.538
y =
-3174.462+2.537(5904)
5904 y = 11803.986
2.4 TASK 4
COMMENT
From all the data that has been arranged into pairs for calculating the correlationship,
the pair of indices that has the strogest correlation are Dow Jones (USA) and Shanghai
Composite where the correlation was 0.8070 where it has a positive value. Since the
value for this pair is the most nearest to +1, then it has a strongest correlation
(Wu, Chye, Kar and Hai 2003). The value stock of Shanghai Index was decrease when
the value stock of Dow Jones (USA) decrease but the change of decline was not very
strong. For example, when the value of Dow Jones (USA) decrease from $9,683.41 in
7th of December 2009 to $9,626.80 in 8th December 2009, the value of Shanghai
Composite was decrease in accordance of the decline in Dow Jones that is 2,845.02
yuan in 7th to 2,714.97 yuan in 8th. The reason why it happens is because the low
value or high value of Shanghai Composite (China) are associated with the low value or
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high value of Dow Jones (USA) (CIMA 2005). This happen mostly because most of the
investments on China was from the United States of America and the export and trade
of China are mostly deal with the USA as well. This will give an impact on the stock
value of China when there are any changes happen on business of USA. Example,
“many US investors have been flocking to mutual funds which invest in the Shanghai
market. The reasons are obvious. The Shanghai Index was the best-performing in the
world, with gains that peaked above 90% for the year 2009” (SMR 2009). That is why,
USA has a big relation with the stock value of Shanghai Composite Index. The
significant example was stated by “director of technical research at Janney Montgomery
that the US can continue to pull away from the market trends of China and this will
continue to boost our relative attractiveness to global competitors" (peopledaily 2010).
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