initial stock analysis
DESCRIPTION
Initial Stock Analysis. Andrew Bentley February 8 , 2012. Outline. Price and returns for Apple Inc. (AAPL) and Ford Motor Inc. (F) Measures of Volatility RV, BV, Sub-Sampled RV, TV Volatility Signatures RV and BV Relative Contribution of Jumps Basic Comparison Between these Measures. - PowerPoint PPT PresentationTRANSCRIPT
Initial Stock AnalysisAndrew BentleyFebruary 8, 2012
Outline
Price and returns for Apple Inc. (AAPL) and Ford Motor Inc. (F)
Measures of Volatility RV, BV, Sub-Sampled RV, TV
Volatility Signatures RV and BV
Relative Contribution of Jumps Basic Comparison Between these Measures
Price and Returns
Unadjusted plots of price data against time Adjusted plots of price data against time after correcting backwards for
stock splits Minute-by-minute geometric returns
“Returns” graphs consider intraday minute-by-minute returns as well as overnight returns.
AAPL: Unadjusted Prices
2:1 Split2:1 Split
AAPL: Stock Splits
Three 2:1 Stock Splits
June 15, 1987
June 21, 2000
February 28 2005
The June 2000, and February 2005 splits fall in the data range
Price adjusts “backwards” to account for the splits
AAPL: Adjusted Prices
AAPL: Returns
F: Price
Nov. 2006Dec. 2008
F: Returns
Measures of Volatility Goal is to measure the integrated variation
for a process:
The realized variance:
AAPL: Realized Volatility (Annualized)
F: Realized Volatility (Annualized)
Estimators for IVt
Bipower Variation (BV):
Threshold/Truncated Variation (TV)
Bipower Volatility BVt (AAPL)
Bipower Volatility, BVt (F*)
Truncated Variation, TVt (AAPL) AAPL, cutoff of 4 standard deviations
Truncated Variation, TVt (F*) F, cutoff of 4 standard deviations
Relative Contribution of Jumps
Effects of Microstructure Noise Observed data is actually some price plus some noise term Look for ways to wash out the effect of the noise without
loosing the vast majority of the data Sub-Sampling
k can be thought of as an “offset”
RVt after Sub-Sampling (AAPL)…RVSS
RVt after Sub-Sampling (F*)…RVSS
Volatility Signatures Measure of the calculated unconditional variance of the stock
as a function of the sampling interval Δ For T time periods, the average realized variance is:
This number is then properly annualized. Replace RVt by BVt and other measures of intraday variance
AAPL: Volatility Signatures
F: Volatility Signatures
RVt- BVt (AAPL)
RVt- BVt (F)
Next Steps: Examine Relative Contribution of Jumps of AAPL vs. those of F Calculate correlation of the two vectors
Expected to be low. Look at stock that are both in the same industry
Examine volatility of Apple with that of Microsoft, Google, Intel, and other technology sector firms.
Examine volatility of Ford with other car manufacturers like GM. Examine correlation of intra-industry stocks
Expected to be high.