BSB123 DATA ANALYSIS Research Report DATE: 11/01/2016 WORD COUNT: 1125 Table of Contents 1.0 Introduction................................................................................................................. 1 2.0 Outliers.......................................................................................................................... 2 3.0 BHP seasonally closing share price......................................................................3 4.0 The distribution of BHP weekly returns.............................................................4 5.0 The relationship between BHP and All Ordinaries index..............................5 5.1 The relationship between BHP closing prices and All Ordinaries index..........5 6.0 Conclusion..................................................................................................................... 6 1.0 Introduction The purpose of this report is to analyse the BHP Billiton data, which can consider whether BHP is a safety investment option to the investors. Australian Stock Exchange (ASX) is one of the famous financial market exchanges in the worldwide, which provides the comprehensive service in the market, so ASX has a strong connection with the economy. Therefore, it is sensitive to affect the world market. Moreover, ASX helps BHP about operating risk and management investment, as BHP provides the major resources, such as nickel, aluminium, metallurgical coal or others that earns lots of interest in gas and oil. This report will be separated into three parts to analyze the BHP financial activity data and all ordinaries index in 1999 to 2012. The first part shows the average of seasonally closing share price; second part explain the general distribution of returns; and the last part analyzes the relation between BHP closing price and all ordinaries index and also between BHP returns and all ordinaries index returns 2.0 Outliers There is the possibility of outliers in the set of data, which would distort the consequence of analysis and it should be considered the possibility of outliers. Outlier may be much smaller or larger than other major value of the data, This analysis should be ensured outliers would not exist and affect the data analysis. The Z-score can check the possibility of the outliers in the set of data, so it should calculate weekly closing share price (Z-score formula and the calculation see appendix). If the calculating of Z-score more than standard deviations of 3 and less than standard deviations of -3, an outlier would be proved and should be removed from the data set before analysis. Based on the calculation, there are eight outliers to affect the analysis. 3.0 BHP seasonally closing share price This part described how the BHP closing prices has change over the period. Figure 1 indicates the BHP closing share price changes over the period from the beginning of 1999 to the ending of 2012. Comparing the end of 2012 with the begin of 1999, from $5.8 to $37.91, the BHP company closing share price increase over than 6.5 times during the period of 13 years. The average of BHP seasonally closing share price 50 45 40 PRICE 35 30 25 20 15 10 5 0 Figure 1. The average of BHP seasonally closing share price In 1999 to 2003, the average of BHP seasonally closing share price remains stable around $10. During 2004, the average of seasonally closing share price shows an upward trend to the second highest peak $44.18 in 2008 season 2. After that, the average of seasonally closing share price sharply decreases from $44.18 to $27.4 in the end of 2008, when there was a worldwide financial crisis. Therefore, this situation influences all the companies which include BHP. However, most of the investors think that the oil and gas which is global capital are safe investment. Hence after the financial crisis, the average of seasonally closing share price was dramatically up and down between 2009 and 2012. During this period, the highest seasonally closing share price is $45.61 in 2011 season 1. 4.0 The distribution of BHP weekly returns The second part shows that the distribution of BHP weekly returns benefits the investors. This is essential factor to attract potential customer investing the firm. Therefore, analysis the weekly returns data can show the existing and future investors, whose may keep current shares and consider investing the firm. Chart Title 300 240 250 Frequency 200 170 150 100 50 0 125 104 8 9 .0 -0 2 .1 -0 37 30 6 .0 -0 9 .0 -0 3 .0 -0 6 .0 -0 0 3.0 0 - 03 0. 0- 6 .0 -0 3 0 0. 9 .0 -0 6 0 0. 7 1 2 .1 -0 9 0 0. 5 .1 -0 2 1 0. return rate Figure 2. The distribution of BHP weekly returns Figure 2 demonstrates the general distribution of BHP weekly returns in -0.12 to 0.15 between 1999 and 2012. Using BHP weekly returns data calculate Z score; some data of Z score are below -0.3 and above 3.0, so these data was removed before analysis the data. According to Figure 2, the shape of the distribution is skewed to the left, which is negative skewed, as the median (0.59%) is greater than the average (0.32%). Furthermore, the highest value and lowest value are 12.82% and -11.36% individually; therefore the scope between highest value and lowest value is 58.6%. Also the modal class is 0-0.03 and the standard deviation is 0.037879. In finance, the standard deviation is very important, as it is the measure of return stability indicators. Therefore, the standard deviation of BHP weekly return is 0.037879, which is small. Hence, the smaller standard deviation represents that the investment is more stable of return and also low-risk. To sum up, BHP Billiton is a low-risk investment company in the long run, as it is low rate of return, but it is steady. 5.0 The relationship between BHP and All Ordinaries index The third part of the analysis is to do with the performances of BHP closing share prices and returns connected to the market, which is very important to the investors. 5.1 The relationship between BHP closing prices and All Ordinaries index The relationship between BHP closing prices and All Ordinaries index 2500 350000 300000 2000 1500 200000 1000 150000 Sum of BHP closing price 100000 Sum of AllOrds index 50000 500 All ordinary index BHPClosing share price 250000 0 0 1999 2000 20012002 2003 20042005 20062007 2008 20092010 2011 2012 Year Figure 3. The relationship between BHP closing prices and All Ordinaries index Figure 3 demonstrates the relationship between BHP closing prices and All Ordinaries index in 1999 to 2012. The all ordinaries index created from the market capitalisation of the top 500 publicly traded companies, which listed on the ASX, so the index, are familiar to influence the market fluctuation. According to Figure 4, while the all ordinaries index significantly increased in 1999 to 2007, the BHP closing price also grew similarly. Moreover, between 2007 and 2008, both all index and BHP declined in order of global financial crisis. Therefore, this illustrates that the BHP closing share price would follow the overall market up and down relatively. 5.2 The relationship between BHP returns and All Ordinaries returns the relationship between BHP return and All Ordinaries Returns 50.00% 40.00% BHP returns 30.00% 20.00% 10.00% 0.00% 0.00% -10.00% 20000.00% 40000.00% 60000.00% 80000.00% -20.00% All Ordinary Returns Figure 4. The relationship between BHP return and All Ordinaries return Figure 4 indicates the relationship between BHP returns and All Ordinaries index returns; also this data did not remove the outlier. The average of BHP returns and all ordinary returns are 0.36% and 0.09% respectively. Therefore, BHP returns the high rate of returns to the investors, as the average of BHP returns was higher than the average of all ordinary returns. Furthermore, the covariance of coefficient is 0.4374, which means that is a positive linear relationship. 6.0 Conclusion In conclusion, this report has shown the analysis of BHP data. Firstly, the BHP closing share prices result illustrates that after the global financial crisis, the BHP market had some effect, but it has an upward trend. Secondly, the BHP weekly returns demonstrate that share price had shown an upward trend, which give investors low-risk and stable return. Thirdly, analysis the relationship between BHP closing prices and all ordinaries index and between BHP returns and all ordinaries returns, these result indicate that the low-risk investment suit the long-term and short-term investor. Furthermore, the low rate of returns is more suitable to the long-term investors. Appendix Introductory Sentences There is the possibility of outliers in the set of data, which would distort the consequence of analysis and it should be considered the possibility of outliers. Z scores formula X X Z S Statement of the outlier rule If the calculating of Z-score more than standard deviations of 3 and less than standard deviations of -3, an outlier would be proved and should be removed from the data set before analysis. Some examples of the Z score calculations Formula of Z scores=(0.0507-0.0036)/ 0.0434904 =1.0843512
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