Premium Essay

Share Price

In: Business and Management

Submitted By lzzy
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Pages 4
Stock markets can make or loss investor’s wealth, this call returns and risks. In today, I had chosen two stocks to analysis in Australia stock markets. The first is the NATIONAL AUSTRALIA BANK LIMITED (NAB.AX) in the bank industry, and the second is QANTAS AIRWAYS LIMITED (QTG.AX) in the transportation industry.

1. Which stock would be more sensitive to a change in economic condition? Please answer by referring to and interpreting the value of an appropriate measurement obtained in Part I.

Follow the Excel’s spreadsheet outputs for Q5.1 and Q5.2. When the stocks bate is over 1 in the stock markets, this mean the stock would be more sensitive (Berk, Demarzo, Harforo, Ford, Mollica & Finch 2014, p371). The two companies’ bate value are 1.2496 and 1.5029, they are both over 1%, but the second company more highest that the first one. This is because the second one is in the transportation industry, they have dull season or peak period. Therefore the second company is more sensitive to a change in economic condition.
2. How closely do your first and second stocks move together? Please answer by referring to and interpreting the value of an appropriate measurement obtained in Part I.

To see the spreadsheet outputs for Q5.3, the two companies’ correlation coefficient are (0.0023) and the correlation is between 1 and -1 (Berk, Demarzo, Harforo, Ford, Mollica & Finch 2014, p362). The tendency is tend to move together and the correlation is (0.4153) to close to 1.

3. Based on your results in Part I, is each of your stocks underpriced or overpriced? And why? Consequently, which recommendation would you make for each stock, “Buy/Hold” or “Sell/don’t buy”?

We can see the spreadsheet outputs for Q7.1 and Q7.2.
The NAB.AX’s expected return is 10.44%, and the realized return is 1.72% lower than expected return. So the stock is overpriced, and we should…...

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