This assignment is designed to give you an opportunity to track key market indicators, to acquaint you with how stock prices and interest rates react to economic and financial news, and to familiarize you with stock and portfolio returns. Beginning Tuesday, September 17, through Thursday, November 14, you are to keep a record of the following:
1. Tuesday and Thursday closing prices of the Dow Jones Industrial Averages;
2. Tuesday and Thursday closing prices of the S & P 500;
3. Tuesday and Thursday closing prices of the Nasdaq;
4. Tuesday and Thursday closing prices of an index of your choice;
5. The yield on the 3-month Treasury bill (Tuesday and Thursday);
6. The yield on the 10-year Treasury note (Tuesday and Thursday).
You can find the information through online sources (e.g., wsj.com, Yahoo!) after the close of trading on Tuesday and Thursday, or in the following day’s financial journals/sources (e.g., The Wall Street Journal).
Additionally, select 2 companies whose stock trades on the NYSE or the Nasdaq. To ensure uniqueness of assignments, the name of one company must begin with the first letter of your first name and the name of the second company must begin with the first letter of your last name. (For example, my first name starts with a “Y” and my last name starts with an “H” so I might choose Yahoo! and Harley-Davidson.) Record the Tuesday and Thursday closing prices for your two stocks.
You are to calculate: (1) each stock’s weekly returns (choose either Tuesday to Tuesday or Thursday to Thursday) and (2) the weekly return for your two-stock portfolio. At the end of the observation period, calculate the average return for your portfolio, using both an arithmetic mean and a geometric mean.
The most easily read method of recording the information is in table or spreadsheet form, with a column for each indicator. The information in each row and column should be clearly marked.
Then, write a 5 to 8 page report, discussing your findings (double-spaced, 1″ margins, 10- or 12-point font). Your report should include (but not be restricted to) a discussion of major economic events that may have contributed to movements in the markets (e.g., the Federal Reserve raised or lowered interest rates during that time period), along with any factors that may have contributed to movements in the prices of your firms’ stocks (e.g., the company announced a merger during this period, there was a stock split, industry factors, etc.). Company websites can provide you with a wealth of information regarding what’s currently going on in the company (including financial information). There are other good sources of company information as well (e.g., ValueLine; Standard and Poor’s, wsj.com).
Spelling, grammar and punctuation are important; you should always strive for clarity in your writing. Use headings as appropriate. I’ll be looking for meaningful content, including a thorough discussion of economic, market and firm-specific events, and a critical analysis of the information/data.