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Project Task - EFN420 - 2023s2

This document outlines the tasks for a group project on analyzing stock market data. It includes: 1) Instructions on formatting the Word report and embedded Excel file with specific question sheets. Files must be named according to the group number. 2) A sample stock market dataset is provided with annual data on market capitalization, income, sales, assets, and debt for NYSE and NASDAQ stocks. 3) Nine questions to answer based on descriptive statistics, correlations, hypothesis tests, and regression analysis of the relationships between the variables. A literature review on how the accounting variables predict stock returns is also required.

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Navin Golyan
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101 views2 pages

Project Task - EFN420 - 2023s2

This document outlines the tasks for a group project on analyzing stock market data. It includes: 1) Instructions on formatting the Word report and embedded Excel file with specific question sheets. Files must be named according to the group number. 2) A sample stock market dataset is provided with annual data on market capitalization, income, sales, assets, and debt for NYSE and NASDAQ stocks. 3) Nine questions to answer based on descriptive statistics, correlations, hypothesis tests, and regression analysis of the relationships between the variables. A literature review on how the accounting variables predict stock returns is also required.

Uploaded by

Navin Golyan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Group Project Task for EFN420 (2023/s2)

(Due Date: 23:59, 14th October 2023, AEST)

Part I: Important Note

• Word count: 1,500-2,000 words (including the 500-word literature review).


• Create an Excel file with 8 spreadsheets. Name each spreadsheet as “Q1”, Q2”, …,“Q8”.
• Demonstrate your analysis and results for each question in the associated spreadsheet.
• Embed your Excel Spread sheet in your Word report. (Watch the video How to embed
Excel files in Microsoft Word? on YouTube for further info.)
• Name your Word and Excel files as instructed below:
o groupnumber.docx for the Word document
o groupnumber.xlsx for the Excel file.
o For example: for Group 2, name your Word report as G02.docx and your Excel file
G02.xlsx
o 1 mark will be deducted if the file names fail to comply with the stated format.
• Your Word document must include a cover page with the following info:
o Group number
o Names and student ID numbers of all group members
o 1 mark will be deducted if the required info is not provided.
• Your Word document must clearly show the formulas used in the analysis and detailed
results which can be verified in your Excel file.
• Should you experience any free-rider issue, contact me by 30th September.

Part II: Submission

• Only the group leader or the selected group member can upload your completed report
to Canvas.
• Only ONE report is required and only ONE upload attempt is allowed for each group. In
case of multiple submissions, only the first submission will be marked.
• Carefully review your Word document (with Excel file embedded) before submission.
Any request to re-submit either before or after 14th October will incur a penalty of 5
marks.
• Any student who fails to make significant contributions to the assignment may run a risk
of being removed from the group by your group members. In the worst scenario, a zero
mark will be assigned to the student.

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Part III: Group Project Task

In a fundamental sense, the market value of a firm should reflect investors’ expectations of the
firm’s future profitability. However, data on expected future profitability is non-existent but
observed measures such as current income, sales, assets, and debt of the firm may influence
the future prospects of the firm.

A sample of NYSE- and NASDAQ-listed stocks (stock exchange code = 11 and 14,
respectively) have been collected (see the Excel file named “Firm Data.xlsx”). The annual
variables of the stocks include:

MARKETCAP = price per share x the number of shares outstanding


INCOME = net income of the firm
SALES = total sales of the firm
ASSETS = book value of the assets of the firm
DEBT = the amount of long-term debt held by the firm
(*All variables are in $millions.)

Answer the questions below based on the data:

1. Describe the data using both graphical and numerical descriptive statistics. Discuss your
findings.
2. How are these variables (MARKETCAP, DEBT, …, and ASSETS, etc.) correlated with
each other?
3. Test if the NYSE stocks tend to have larger market values than the NASDAQ stocks at the
5% significance level.
4. Test if the net income of the NYSE stocks is more volatile than that of the NASDAQ
stocks at the 5% significance level.
5. Perform an OLS regression analysis with MARKETCAP as the dependent variable and
INCOME as the independent variable for all stocks (both NYSE and NASDAQ stocks).
Discuss your findings based on the regression results.

6. At the 5% significance level, examine whether the impact of net profit on market cap
differs between these two groups of stocks. (Hint: Consider using a dummy variable D in the
regression model.)

7. Now consider all accounting variables (i.e., INCOME, DEBT, ASSETS, SALES) as the
regressors in the model. At the 5% significance level, examine which variables exhibit
explanatory power for market capitalization. Does this new multiple regression model
outperform the single regression model in Q5?

8. Repeat Q7 by taking deviations from means for all variables. Thus, the dependent variable
𝑌𝑖 becomes (𝑌𝑖 − 𝑌̅𝑖 ) and each regressor 𝑋𝑖 becomes (𝑋𝑖 − 𝑋̅𝑖 ). Compare your results with
those found in Q7. What are your findings?

9. Write a 500-word literature review on how the four accounting variables help explain or
predict stock returns.

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