London School of Commerce Statistics and Quantitative Methods

Name: Benimana Joshua

ID number: B0076FSFS1111

Programme: BABS1.

Semester: Semester 1

Lecturer: DAVID ACQUAYE

Due Date: 20th February 2012

TABLE OF CONTENT PAGE
Answers to question 1………………………………………….. 3-4
Answers to question 2………………………………………….. 5-8
Answers to question 3………………………………………….. 9-11
Answers to question 4………………………………………… 11-15
References……………………………………………………….16

QUESTION 1:
A)
Year | Tesco | Sainsbury | Marks & Spencer | | 2005 | 14.71 | -1.61 | 17.25 | | 2006 | 16.46 | 3.26 | 27.16 | | 2007 | 17.23 | 8.58 | 28.6 | | 2008 | 15.34 | 8.14 | 24.67 | | 2009 | 12.25 | 8.63 | 18.6 | | 2010 | 12.51 | 10.93 | 16.43 | | Mean | 14.75 | 6.3216667 | 22.11833333 | | Standard Deviation | 2.034296 | 4.6315588 | 5.336251181 | (fig. 1) | | | | | |

(fig2)

According to (http://www.investing-in-mutual-funds.com) the arithmetic mean and standard deviation are the first and most simple of the statistical concepts used in investing. Mean is used as an estimate of expected future returns of the mutual funds because it’s the best estimate we can make from past data. Standard deviation is a measure of variability, which is used as the standard measure of the total risk of individual assets and portfolios of assets.
On Figure 1; the 7th row represents the mean for all the companies. On the same table (8th row), the standard deviation was calculated. According to the table, M&S (Marks & Spencer) Company has the highest mean and standard deviation that implies that the investor should consider investing in this company.
In other words, the company with the highest risk and highest return is M&S (Marks and Spencer) with mean of 22.11 and the standard deviation of 5.336, the investor will be interested in investing in this company due to the fact that with high risk, there is a high returns that means that the project of investing in this certain company is considered to be viable (high profits). However, some investors will be scared of risking high but end up with the high returns. Tesco has the lowest standard deviation (2.03) meaning risk and a moderate mean (14.75), which shows that the company is risking less and gaining high returns. I highly would recommend the investor to invest in Tesco Company because there is a low risk and the returns are high.
The table also indicates other companies’ mean and standard deviation. Sainsbury Company’s standard deviation is (4.6) and the mean is (6.32). The risk is low and the returns gained are very low. The investor will not be interested in this company.
Referring to the calculated data, I would recommend to the investor to invest in Tesco, considering its risk-return spectrum. Tesco has the lowest risk (standard deviation: 2.03) but high returns (mean: 14.75).

Question 2: I) SUMMARY OUTPUT | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Regression Statistics | | | | | | | | | | | | | | | | | Multiple R | 0.99395 | | | | | | | | | | | | | | | | | R Square | 0.987936 | | | | | | | | | | | | | | | | | Adjusted R Square | 0.983412 | | | | | | | | | | | | | | | | | Standard Error | 10.7232 | | | | | | | | | | | | | | | | | Observations | 12 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ANOVA | | | | | | | | | | | | | | | | | | | df | SS | MS | F | Significance F | | | | | | | | | | | | | Regression | 3 | 75331.02 | 25110.34 | 218.3755 | 5.19E-08 | | | | | | | | | | | | | Residual | 8 | 919.8957 | 114.987 | | | | | | | | | | | | | | | Total | 11 | 76250.92 | | | | | | | | | | | | | | | | |