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For this module I am again going to refer you to the data you have been collecting. Answer the following questions in reference to your data. Can you perform a multiple regression analysis with the data you have been collecting without changing that data or adding to it? Why or why not? (Note: For an additional predictor variable X2 to be useful, it should be correlated with the dependent variable Y, but NOT correlated with another predictor X1. Example: Suppose we want to predict… Y = growth rate of a food crop …using the following predictor: X1 = mean daytime temperature during growing season, in degrees F. That would probably work. But now, suppose we try to use an additional predictor X2, where X2 = mean daytime temperature during the growing season, in degrees C. This would add nothing to the prediction, since it’s the same information as X1, only expressed in different numbers. On the other hand, if we used… X2 = mean daily rainfall during the growing season, in inches …we’d probably improve our prediction of Y.) Can you perform a multiple regression analysis using ONLY the data you’ve been collecting? Why or why not? Write a 2-3 page paper addressing the issue above. Please turn this in to me by the end of this module. SLP Assignment Expectations: In general, SLPs are expected to have the attributes of precision, clarity, breadth, depth, and applicability. However, not all of these attributes are applicable to all SLPs, especially in math and science courses. For this SLP, the expectations are: Accurately distinguish between simple and multiple regression (depth). State how multiple regression can be used with the data you’ve collected. If it cannot be used, state why not (applicability).
STS401 – Business Statistics
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Start by viewing this presentation on TUI University (n.d.) Multiple regression analysis. (Powerpoint presentation with voiceover.) Retrieved from Now review this information on multiple regression in HyperStat Online by clicking Lane, D. (n.d.). HyperStat: Introduction to multiple regression. Retrieved from Read the General Purpose section of the below article. You can review the entire article, but read the General Purpose section for a good discussion of the use and purpose of multiple regression analysis. StatSoft, Electronic Text Book (1998). Accessed on November 28, 2007 at: You should also click Lane, D. (n.d.). HyperStat: Measuring the importance of variables in multiple regression. Retrieved from Waner, S. (2007). Regression calculator. Retrieved on March 1, 2008, from Optional Lane D. (n.d.) HyperStat Online Statistics Textbook, Retrieved September 9, 2007, from StatSoft (n.d.) Multiple Regression, Retrieved September 9, 2007, from |
TheDJIA and Its Relationship to Stock Price
1. What is the name and NYSE symbol of the selected company?
McDonalds Corporation – MCD
2. What is its primary business?
McDonalds Corporation uses marketing, financing and operations, the three functions of management mechanism to work its $ 23.8 billion a year quick service restaurant business (QSR), in 100 countries employing 480,000 employees. McDonalds use basic principles of its management structure to continuously improve its business of QSR by planning, organizing, staffing, leading and controlling. McDonalds is a food production process, base company who specialized in their customer service and the speed of service to attract customers.
McDonalds is a Dow Jones 30 Corporation listed at NYSE under the symbol of MCD. When you feed 50 million customers at 30,000 restaurants around the world every day, you would think just getting the basics right would be enough. McDonalds Corporation knows that running its core business correctly is absolutely necessary for success, but is insufficient to keep it growing. For that, the Golden Arches is simultaneously attending to operating flawlessly while working hard to innovate to grow its future. (Gabmen & Russell, 2006, p. 21)
McDonalds Corporation Frequency Distribution Table
3. What categories and types of data are you collecting?
The data on stock prices is discrete data.
4. Where will you find the data needed for this S. L .P.
I have been reading daily papers and recording closing price for the day. I have also used official websites for McDonalds Corporation (
http://phx.corporate-ir.net/phoenix.zhtml?c=97876&p=irolstockLookup&t=HistQuote&control_firstdatereturned
) and Dow Jones Industrial Average (
http://money.cnn.com/data/markets/dow/?page=2
)
.
5. Would a frequency distribution table be appropriate for displaying your
stock’s daily closing price?
Frequency distribution table is a good way of presenting what is happening within a certain companies stock prices. It gives a single outlook of what is happening. Days that there has been a rise in share price can be seen at a glance
References
Dow Jones Industrial Average (2010).Retrieved on 24th August 2010 from
http://money.cnn.com/data/markets/dow/?page=2
McDonalds Corporation (2010). Retrieved on 24th August 2010 from
http://phx.corporateir.net/phoenix.zhtml?c=97876&p=irolstockLookup&t=HistQuote&control_firstdatereturned
Gabmen, J., & Russell, S. (2006). Think Big, Start Small, Scale Fast: Growing Customer
|
The following is the table for closing tables for McDonald and Dow Jones Industrial Average. |
|
Date |
McDonalds Closing stock |
Dow Jones Industrial |
|||||||
|
7/30/2010 |
66.71 |
10465.94 |
|||||||
|
7/29/2010 |
66.14 |
10467 .16 |
|||||||
|
7/28/2010 |
66.11 |
10497.88 |
|||||||
|
7/27/2010 |
67.31 |
10537.69 |
|||||||
|
7/26/2010 |
69.02 |
10525 .43 |
|||||||
|
7/23/2010 |
69.22 |
10424.62 |
|||||||
|
7/22/2010 |
69.9 4 |
10322 .3 |
|||||||
|
7/21/2010 |
70.84 |
10120.53 |
|||||||
|
7/20/2010 |
70.9 |
10229.96 |
|||||||
|
7/19/2010 |
71.33 |
10154 .43 |
|||||||
|
7/16/2010 |
10097.9 |
||||||||
|
7/15/2010 |
69.91 |
10359 .31 |
|||||||
|
7/14/2010 |
70.87 |
10366.72 |
|||||||
|
7/13/2010 |
70.11 |
10363 .02 |
|||||||
|
7/12/2010 |
69.97 |
10216 .27 |
|||||||
|
7/9/2010 |
69.9 |
10198 .03 |
|||||||
|
7/8/2010 |
10138.99 |
||||||||
|
7/7/2010 |
70.4 |
10018 .28 |
|||||||
|
7/6/2010 |
69.77 |
9743.6 2 |
|||||||
|
7/2/2010 |
69.38 |
9686.48 |
|||||||
|
7/1/2010 |
69.73 |
9732.5 3 |
(Dow Jones Industrial Average, 2010) and (McDonalds Corporation, 2010).
Mean
Mean this is used to calculate the average of the data. The mean will assist in giving a clue of the expected results. The extremes can be done away with, and this is the first step of improving the accuracy of the data.
The mean for the data is
McDonald daily closing price average for the month of July= 1458.37/21 = 69.44619048
Dow Jones Industrial Average Mean for the month of July is = 214667.09/21 = 10222.24238
Mode and the Median
Mode and the median; they are the most frequent value of the statistics, when this is compared with the mean, analysis of the most probable can be determined this assist to guide the flow of the statistics.
Mode shows the number that is most frequent and sometimes it happens that there is more than one mode when the maximum numbers appearing are more than one. On the other hand, there may be data that does not have a mode when the number of a data appearing is equal, for example a set of two data’s all over the statistics.
Median is calculated by arranging the statistics in a descending/acceding order and the number appearing in the middle is the median. There are times that there are two numbers at the centre, the median is the average of the two numbers.
McDonald mode = 69.94
Dow Jones Industrial Average mode = no mode
Median of McDonald is 69.91
Dow Jones Industrial Average median is 10229.96
What is the probability that your McDonald stock price will increase if the DJIA increases?
This is the conditional probability that happens if one variable changes in our case the variables are McDonald stock price and Dow Jones Industrial Average. To calculate this I will take Dow Jones Industrial Average as the independent variable and McDonald stock price as the dependent variable, to calculate this I will use the data above and compare these two variables;
No of times that there is a rise in McDonald stock price when there is a rise in Dow Jones Industrial Average = 4
The probable increases ones (total number of increase in Dow Jones Industrial Average) = 7
Probability that your McDonald stock price will increase if the DJIA increases
= 4/7
Reference List
Dow Jones Industrial Average (2010). Retrieved on 1st September 2010 from
http://money.cnn.com/data/markets/dow/?page=2
McDonalds Corporation (2010). Retrieved on 1st September 2010 from
http://phx.corporateir.net/phoenix.zhtml?c=97876&p=irolstockLookup&t=HistQuote&control_firstdatereturned
Smithson, M. (2003). Confidence intervals. Quantitative Applications in the Social Sciences Series, No. 140. Belmont, CA: SAGE Publications
The DJIA and Its Relationship to Stock Price
DJIA
It is one of the stock indexes that were presented by
Charles Dow
, editor Wall street journal and cofounder of
Dow Jones & Company
. When calculating the index, a divisor called Dow divisor is used to divide all the prices of 30 stocks listed in the U.S. market. In cases of market adjustments and changes in stock prices, for example in cases of stock splits, stock spinoffs, the divisor is adjusted to ensure that the figure remains effective.
The formulae are where P= price and d is Dow divisor
Currently the figure is less than one after adjustments (Sullivan & Sheffrin, 2003).
This is the formula that is used when there is a change in the stock market. The current value of divisor is .132319125. For every change in $1 in average it results to a 7.56 points change movement effect. It has been in use for the last 140 years (Dow Jones 2008-02-11).
Null hypotheses
There is no relationship between the DJIA and the stock movement of McDonald Company.
Alternative hypotheses
A change in the DJIA results to a change in the stock price of McDonald.
The change is inversely related.
Data collected is:
Date
McDonalds Closing stock
Dow Jones Industrial
Average.
7/30/2010
66.71
10465.94
7/29/2010
66.14
10467.16
7/28/2010
66.11
10497.88
7/27/2010
67.31
10537.69
7/26/2010
69.02
10525.43
7/23/2010
69.22
10424.62
7/22/2010
69.94
10322.3
7/21/2010
70.84
10120.53
7/20/2010
70.9
10229.96
7/19/2010
71.33
10154.43
7/16/2010
69.94
10097.9
7/15/2010
69.91
10359.31
7/14/2010
70.87
10366.72
7/13/2010
70.11
10363.02
7/12/2010
69.97
10216.27
7/9/2010
69.9
10198.03
7/8/2010
70.87
10138.99
7/7/2010
70.4
10018.28
7/6/2010
69.77
9743.62
7/2/2010
69.38
9686.48
7/1/2010
69.73
9732.53
(Dow Jones Industrial Average, 2010) and (McDonalds Corporation, 2010)
|
10466 |
| 10467 |
|
10498 |
|
10538 |
| 10525 |
|
10425 |
| 10322 |
|
10121 |
|
10230 |
| 10154 |
|
10098 |
| 10359 |
|
10367 |
| 10363 |
| 10216 |
| 10198 |
|
10139 |
| 10018 |
| 9743.6 |
|
9686.5 |
| 9732.5 |
|
-0.46388 |
Also find excel sheet with the same.
Pearson’s r correlation
The figure is calculated in the spread sheet and the figure is -0.46388.
Meaning of Pearson’s r
It is the covariance of two sets of data; dependent and independent variable then divided by their standard deviation. It ranges from -1 and +1. The following formula is used to calculate the figure where X is the dependent variable and Y the independent variable. It can though be calculated using spread sheets (Creswell, 2003).
When the figure is one it means that the data is perfectly correlated and a change in X results to a change in Y. They lie on the same straight line. Their change is proportional in that if X changes with 2 then Y changes with 4. All other changes of Y will be double changes of X.
When the value is -1, then it means that they lie on the same line but they are correlated differently where if x increases, then y decreases.
On the other hand, if the correlation is a Zero (0). Then it means that there is no correlation between independent and dependent variable (Stigler, 1989).
Depending on how negative or how positive the figure is, the relationship of data can be calculated. In our case the r= -0.46388, meaning for every decrease in X (McDonald price), then there is a decrease in the DJIA, however it is not with the same proportion that is why it does not lie on the same line.
The following diagram shows a plotted Pearson correlation diagram;
Diagram from Stigler, 1989.
Reference List
Creswell, J. (2003). Research Design: Qualitative, Quantitative, and Mixed Methods Approaches. Thousand Oaks, California: Sage Publications.
Dow Jones (2008-02-11).
“Dow Jones to change the composition of the Dow Jones Industrial Average”
. Press release. Retrieved 2010 September 15.
Stigler, M. (1989).
“Francis Galton’s Account of the Invention of Correlation”
. Statistical Science 4 (2): 73–79.
Sullivan, A. and Sheffrin, M. (2003).
Economics: Principles in action
. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 290.
