10 Sep Is this Normal? One theory about the daily changes in the closing price
Is this Normal?
One theory about the daily changes in the closing price of a stock is that these changes follow a random walk – that is, these daily events are independent of each other, and move upward or downward in a random manner – and can be approximated by a normal distribution (Smith, 2020). To test this theory, you will collect the most recent closing prices of stocks from your favorite company or brand and see if this is truly the case.
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1. Choose your favorite company or brand and search finance.yahoo.com for the company’s name and “historical stock prices”.
2. Download the stock history for this company for the past 6 weeks by selecting the appropriate dates and clicking on “Download to Spreadsheet” at the bottom of the page.
3. Calculate the daily stock change in the closing stock prices by taking the difference between the closing and opening price for the day.
4. Run the Descriptive Statistics->Summary Statistics, available in the Excel Data Analysis Tools, or use the individual Excel functions to calculate the measures listed below for the daily stock change. Share the summary table or the following descriptive measures for the daily stock change:
· minimum
· maximum
· median
· mean
· sample standard deviation.
5. Calculate the 1st and 3rd quartiles of the daily stock change.
6. Share the 5-number summary.
7. Create and post a Box & Whiskers Plot using your 5-number summary.
8. Look at your box and whisker plot.
· State which of the following best describes the shape?
· right skewed (median < mean)
· left skewed (mean < median)
· symmetric (mean ≈ median)
· Based on the description of the shape, explain why you would or would not consider your daily stock change to be normally distributed.
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