Week 1 Market Case Study | Index (Economics) | Economy Of The United States

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ACST252
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  © Copyright 2016. Macquarie University Page 1 of 3 ACST252 Finance and Financial Reporting Topic 1 – Overview: Context of the Econo! and the Financial ar#et$% The Corporation and &t$ O'(ective$ ar#et Ca$e St)d! &ntrod)ction An important proy of ho! mar ets are performing in genera# is the equity mar et in$e. %o!ever& this proy can 'e mis#ea$ing as the in$e structure may $istort the rea$ing an$ provi$e a fa#se impression that everything is fine. (his eercise !i## require you to investigate a !e##) no!n mar et in$e& the *tan$ar$ an$ Poors +00 ,n$e -*P +00 ,n$e/ that trac s the performance of the #argest +00 companies #iste$ on the e! or *toc change. ou !i## #earn a'out ho! in$ices may 'e structure$& ho! the structure can $istort the mar et an$ a#so ho! the mainstream me$ia may 'e reporting incomp#ete information a'out the actua# con$itions of the mar et. urthermore& you !i## $eve#op your M* ce# s i##s as !e## as provi$e you an opportunity to app#y your statistica# $ata ana#ysis s i##s from first year in a practica# environment. The Context of the C)rrent ar#et 4ith over seven years of 5ero interest rate po#icy an$ $u'ious resu#ts& the previous e$era# eserve Presi$ent& 7en 7ernan e& announce$ that they !ou#$ 'egin to re$uce currency printing an$ see to return the U* economy -an$ the g#o'a# economy for that matter/ to norma#. %is successor& 8anet e##en& inherite$ this po#icy at the start of 2019& en$ing effective#y a## currency printing in :cto'er 2019. (he net step !as to start increasing interest rates from 0)0.2+; to more norma# #eve#s. <uring 201+& the g#o'a# economy eperience$ much vo#ati#ity an$ this impacte$ on the U* economy. 8anet e##en use$ many ecuses to $e#ay interest rate rises an$ fina##y raise$ it at the #ast meeting of the year. 4ithin three !ee s& the g#o'a# economy starte$ sho!ing signs of !ea ness an$ panic as asset prices fe## an$ $eman$ for physica# goo$s -represente$ 'y commo$ities/ further eacer'ate$ the pessimism. (he current state of the U* economy is su'=ect to much $e'ate& !ith much $ata 'eing re#ease$ that is use$ to paint contrasting pictures. act#y !hat is the true state of the economy then > is it recovering 'ecause of reporte$ increases in =o's an$ the strong recovery of the financia#  © Copyright 2016. Macquarie University Page 2 of 3 mar ets or is it a mirage as the rea# !age gro!th is stagnant an$ many =o's that are create$ are not sufficient to sustain a fami#y? :r is it 'oth? Ans!ering this question is $ifficu#t an$ may 'or$er on impossi'#e 'ecause of a myria$ measures that can 'e use$ to represent the economy an$ $ifferent factors may $rive this. At  'est& !e can have a #oo at one of the many aspect of the economy that the me$ia spea s !i$e#y a'out. 4e !i## #oo at the U* stoc mar et via the *tan$ar$ an$ Poors +00 ,n$e that represents the #argest +00 companies across the ten sectors. (he $ata for the in$e an$ the constituents are on#ine un$er the fi#e @*P+00 ,n$e <ata 16012+.#s. ou may fin$ these artic#es usefu# as a starting pointB httpB!!!.5erohe$ge.comne!s201+)12)0Dgoing)fang)#ess httpB!!!.5erohe$ge.comne!s201+)12)10!ho#e)#ot)ne!)#o!s)mar et)near)its)high  &n*T)torial Activit! Create t!o ne! !or sheets ca##e$ @Priceesu#ts an$ @eturnsesu#ts. ,n each !or sheet& copy the companies into the top ro! an$ then in the 2 n$  ro!& !rite $o!n the starting $ate of tra$ing for each company stoc -the first $ate for !hich there is numerica# $ata for price an$ returns/. *et the 'eginning entry in the perio$ at 100 for each company. (hen ca#cu#ate the stan$ar$ise$ returns of the stoc 'ase$ on the price an$ the returns in$e over the perio$. <o this for 'oth 112019 to 2+12016 -since the 'eginning of the e$era# eserve po#icy of reversing their accommo$ative po#icy/ an$ 11201+ to 3112201+ -for the year of 201+ !hen  8anet e##en inten$e$ to raise interest rates/    © Copyright 2016. Macquarie University Page 3 of 3 +oewor# Activit!  1.%o! is the *P +00 ,n$e structure$? %o! $oes each company constituent contri'ute tothe in$e?2.our $ataset contains price an$ returns in$e $ata. 4hat is the $ifference 'et!een thestoc price an$ returns? -As an eamp#e& #oo at the rate of return generate$ over theperio$ for the stoc 3M using the price measure an$ the returns in$e/3.eferring to the $ataset& ans!er the fo##o!ing questionsBa./   %o! $i$ the *P +00 ,n$e perform over the t!o perio$s? './   %o! many companies $e#ivere$ positive returns over the t!o perio$s? 4hat is theproportion?   c./   4hat $istortions& if any& can you i$entify a'out this in$e as an in$icator of the genera# economy?   $./   4hat further tests or information can you suggest to improve your stu$y? Consi$er the statistica# tests you have encountere$ in *(A(1E1 an$ perform one or t!o. ,re$entation Ta$# -.)e in the /ee# 5  T)torial ,n a group of 3)+ peop#e& prepare a presentation that $iscusses the *P +00 ,n$e an$ its appropriateness for its ref#ection of the state of the genera# economy. ou may !ant to perform a quantitative ana#ysis to $emonstrate the #eve# of $istortion& or other!ise& of the in$e 'y the in$e structure an$ the constituents. A#so& $iscuss 'rief#y !hat further information you may nee$ to assist your investigation.
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