Techniques for Data Analysis (NBS8002)

Assignment
Objective of the assignment:

To examine, using statistical analysis of real data, the impact of firm-specific information on a company’s stock returns. (Note that this assignment constitutes 100% of the assessment for the NBS8002 module.)
Three activities:
a) Selecting a public company for analysis, collecting relevant data, and reviewing literature. (Proportion of Marks Allocated to this Activity: 10%)

You must select a single public company satisfying the following criteria:

? The nature and dates of at least four significant (preferably related) information events occurring over a relatively short period of time (not more than eight months) can be identified.
? Three years of continuous daily stock price data, beginning at least two years before the first information event and ending not less than three months after the final information event, are available for analysis.

Note:
1. Each student must choose a different company and have their choice approved by me. A hardcopy should be deposited in the submission box in the Postgraduate Coffee Lounge (6th Floor, NUBS) and also a softcopy titled TDA ASSIGNMENT MY COMPANY should be emailed to me at bo.che@ncl.ac.uk by 1pm on Friday 15th March 2013 in order to seek approval. Approval will be given on a first-come, first-served basis, so you may well wish to seek approval earlier than the deadline. Should a student fail to select a company by the above deadline, then one will be allocated to him/her, and a mark of zero will be recorded for this part of the assignment.

2. There are a variety sources (e.g. public web information such as yahoo finance, financial times, London Stock Exchange, and university facilities: Datastream at room 4.03 NUBS) from which you can collect the data (e.g. daily price and market index) you need for the assignment. A seminar aiming at helping you use Datastream will be held at the start of next term.

3. Literature review is essential to gain the insight into methodology (how the study is conducted) and other issues we need to be aware of before performing analysis. You are also expected to make critical comments on the methods taken by other people.
b) Performing appropriate analysis of the impact of multiple information events on the stock returns of a public company

In order to focus solely on the impact of firm-specific information on stock returns, a control is needed to model daily returns conditionally expected from contemporaneous non-firm-specific information. The market model should be used as the control.

Suitable tests for coefficient stability, and for the validity of the Ordinary Least Squares assumptions, should be conducted, and appropriate modifications made to the estimated model as necessary. The final estimated model can then be used to calculate prediction errors (abnormal returns) in the event windows.

Note: A lecture covering the methodology and research design will be given at the start of next term.

c) Writing up a report describing your research design and interpreting your research results. The report must be handed in for marking to the Postgraduate Coffee Lounge (6th Floor, NUBS) by 1pm on Monday, 20th May 2013. (Proportion of Marks Allocated to this Activity: 90%)
The report should describe the nature of the information events for your chosen company, the hypotheses you tested, any problematic data issues you encountered (such as treatment of capitalisation changes, rights issues, dividends, suspension of trading etc) and how they were handled, your research design, interpretation of results and your conclusions.

General Guidelines for the Format of the Report

Length

The report must be not less than 4,000 and not more than 5,000 words. Footnotes and the bibliography count in assessing the number of words. Appendices do not. However, you must not rely on the appendices to provide key information, as they will not normally be marked. Reports which exceed the word limit will be penalised.

Layout

Loose-leaf numbered sheets with double spacing should be used. The report must be typed and bound (soft-cover binding is acceptable). There should be a 1.5” (4cm) margin on the left hand side of each page. The report must include, at the beginning, a table of contents and, at the end, a complete bibliography of sources consulted.

Grammar and Style

Although your report will be marked primarily on its content, grammar and style are also important factors. Bad grammar and spelling mistakes will divert attention from the points you are trying to make.

Quotations

Short quotations can be included naturally in the text, but anything which runs for more than three lines should be separated from the text in an intervening paragraph and indented about half an inch from the left hand margin. Large numbers of long quotations should be avoided.

References

All references to books and articles should take the standard form used in an academic journal such as the Journal of Business Finance and Accounting.

Footnotes

Footnotes must be given at the bottom of the page. They are used primarily to explain or pursue arguments further, or to give examples, references, etc. They generally contain material which would divert attention from the main thrust of the argument if presented in the text itself.

Plagiarism

Plagiarism is a serious matter and will be subject to penalties – a lower mark being awarded or, in extreme cases, a nil mark. Clearly, the imposition of such a penalty could have dire consequences and may lead to no degree being awarded. Plagiarism includes adopting the arguments of another without acknowledging the source. It may take two forms:

(a) Passing off the work of another as one’s own;
(b) Suppression of sources from footnotes and from the bibliography.

It is, however, envisaged that you will be synthesising and commenting upon the work of others. This is not only valid but is an intrinsic part of the exercise. The key point is that you should always explicitly acknowledge (by referencing) material/ideas that are other people’s work.

Some Useful References

Some references, containing useful bibliographies, to assist you with the assignment follow:-

For examples of significant information events worthy of study, see Foster, G, Financial Statement Analysis, 2nd ed., Prentice-Hall International, 1986, Chapter 11.

For examples of event study research using the market model, see Ruback, R S, “The Cities Service Takeover: A Case Study”, Journal of Finance, 38(2), May 1983, pp 319-330; Lloyd-Davies, P & M Canes, “Stock Prices and the Publication of Second-Hand Information”, Journal of Business, 51(1), January 1978, pp 43-56.

For a review article on event study methodology, see Strong, N, “Modelling Abnormal Returns: A Review Article”, Journal of Business Finance & Accounting, 19(4), June 1992, pp 533-553.

For good coverage of econometric issues, see Newbold, P, W L Carlson. & B Thorne, Statistics for Business and Economics, 6th ed, Pearson Prentice Hall, 2007.

Techniques for Data Analysis (NBS8002)

Assignment: Company Approval Form
Student Name………………………………………………………………………….
Chosen Company………………………………………………………………………
Stock Exchange Listing………………………………………………………………..
Period over which continuous daily price data available………………………………
Natures & Dates of Four Information Events for Chosen Company:
a) …………………………………………………………………………………

b) …………………………………………………………………………………

c) …………………………………………………………………………………

d) …………………………………………………………………………………

For Office Use

Approved………………………………………………………………………………

Date…………………………………………………………………………………….

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