Performance of Savills Real Estate Company - Case Study Example

University

Savills (real estate company)

Introduction

Savills is a global real estate company that has prided itself in rendering its services in various parts of the world, thereby enhancing its growth. It was listed on the London Stock Exchange in the year 1988 and has participated in the market since then, harnessing a lot of financial input from the market. With light to the ventures that the company is involved in, there is a need to carry out a statistical relationship between the stock price Savills basing on three variables (Savills.com, 2016, np). These include; The US$/GB£ exchange rate, the 10-year Gilt interest rate, and the FTSE. The study shall aim to cover the performance of the company in a 2-year period, and the comparison shall be made to be in line with data for the end month. The main objective of the test shall be to ascertain whether there lies some level of relationship between the share price of Savills and the various variables that are closely related to it. The research shall be based on the following hypotheses;

Ho: There is no significance difference between the stock price of Savills and the FTSE

H0- There is no significant difference between the stock price of Savills and US$/GB£ exchange rate

H0- There is no significant difference between the stock price of Savills and the 10-year Gilt interest rate.

All the hypotheses shown shall be tested using the One-Way ANOVA whereby the researcher will be interested in determining whether there is a form of relationship between the share price of Savills and the three variables that may be indicated. In such a case, it would be appropriate to determine the form of relationship that may be there among them and draw the necessary conclusions basing on the facts obtained and as well, determine whether the company is performing well or not. The use of these values is also paramount given that they are the ones indicated in the data set and will, therefore, paint the most appropriate picture as far as the general outlay of performance of the company is concerned.

Methodology

It is important to carry out the analysis of different elements regarding the stock of Savills with regards to the different variables that may be put in place. The analysis process shall put into various perspective strategies as part of a methodology. It shall make use of ANOVA analysis in such a way that it will be important to test the hypothesis that may be created. The use of using ANOVA is that it shall play a huge role in showing the level of consistencies that may exist in the data set for the purposes of establishing a good basis for the right outcomes and conclusions in the end (Kabacoff, 2015, 32).

Table 1.0 below shows summary statistics for a number of shares for the company that were traded at the FTSE during the month of September between 1st and 14th. The mean number of shares presented is 17774.23 with a standard deviation of 268.5698. the range is, however, huge, being about 1196. The aspect shows that the big difference between the largest amount of shares and the least amount of shares that were traded for the company could have played a huge part in determining the big standard deviation that the company shares would have from the mean.

Table 1.0: Summary statistics for stock performance at the FTSE

17889.8

Mean

17774.23

Standard Error

49.03391

Median

17848.4

Mode

#N/A

Standard Deviation

268.5698

Sample Variance

72129.73

Kurtosis

2.813679

Skewness

-1.58097

Range

1196

Minimum

16997.1

Maximum

18193.1

Sum

533226.9

Count

30

Data description

The data used for the exercise relates to Savills real estate company whereby there is an indication of stock prices of various days and the kind of changes that they went through during the month of September 2016 from 1st to 14thon the London Stock Exchange. It is also edged against the performance of the stocks at the FTSE as well as the US$/GB£ exchange rate.

The aim lies in determining how the stocks of the firm have been performing for a given period, given the different variables such as the FTSE, US$/GB£ exchange rate and the 10-year Gilt interest rate. The data appears quite consistent and able to provide the desired results, provided the right procedure is put into coming up with the outcomes and due measurement procedures are put into testing the hypothesis that may be created. It is, however, important to point out that there is missing values among the data set provided, the case shall, therefore, have an impact on the overall results that shall be obtained. It will, therefore, be important to exclude the ‘missing values’ part during the analysis process in a bid to come up with factual data that will be crucial to establishing the right conclusions and draw appropriate recommendations from the same.

Results and Analysis

The results shall be based on several hypotheses that will be formulated and favourable conclusions later on, made from the same in order to come up with favourable outcomes and as well, be able to understand the actual performance of the company in the market as well as the chances that it has in terms of being able to stand and compete favourably with others that already do exist in the market.

The analysis is as follows;

Ho: There is no significance difference between the stock price of Savills and the FTSE

The hypothesis was tested using the one-way ANOVA at 95% confidence level.

Basing on the results shown in appendix 1.0, the p-value is more than 0.05 because it is at 0.909803. We, therefore, fail to reject the null hypothesis and adopt it instead.

Source of Variation

SS

df

MS

F

P-value

F crit

Between Groups

4.63E-06

1

4.63E-06

0.012936

0.909803

3.990924

H0- There is no significant difference between the stock price of Savills and US$/GB£ exchange rate

The hypothesis was also tested at 95% confidence level. The findings obtained indicated that the p-value of 0.001171, was less than 0.05. Given the fact that the value is less than 0.05, we reject the null hypothesis and adopt the alternative hypothesis instead (Ishikawa, 2014, 67).

Source of Variation

SS

df

MS

F

P-value

F crit

Between Groups

1.18003E+11

1

1.18E+11

15.14901

0.001171

4.451322

H0- There is no significant difference between the stock price of Savills and the 10-year Gilt interest rate.

The test was also tested at 95% confidence level using the One-Way ANOVA and the results as indicated in appendix III indicate that the P-value of 0.909803 is more than 0.05. Therefore, it would be appropriate to accept the null hypothesis.

Source of Variation

SS

df

MS

F

P-value

F crit

Between Groups

4.63E-06

1

4.63E-06

0.012936

0.909803

3.990924

Conclusion and Recommendations

The conclusions clearly show that there is a relationship between some of the variables set for the company with the share price of the company in the market while others do not have any given effect in the long run. For instance, the results obtained for the relationship between the stock price of Savills and the FTSE clearly showed a p-value that was less than 0.05 (Gelman et al., 2014, 86). In such a case, it would be appropriate to fail to reject the null hypothesis and instead, indicate that there is a close relationship between the performance of the stock of Savills at the FTSE and the general price that it may have on the market. Such a case goes a long way to indicate that the company may need to carry out a lot of actions in order to enhance high levels of returns and the growth of the price of its shares, thereby, raising the chances for better performance in the market.

It is also evident that some of the variables that are included in the study fail to play a part in influencing the share price for the share of the company. For instance, the relationship between the stock price of Savills and US$/GB£ exchange rate indicated a p-value that was less than 0.05 (Stokes et al., 2012, 96). The aspect clearly showed that the US$/GB£ exchange rate had no actual effect on the final share price of the company in the market. In such a case, the company may not need to put in a lot of effort to concentrate on the performance of the pound in the market at the exchange rate against the dollar as such a case does not commensurate in any way with the kind of benefits that the company may get from the same.

It would, however, be important for the company to consider the performance of the 10-year Gilt interest rate as it has a positive influence on the stock price of Savills in the market. The company could, therefore, make strategic plans that are geared towards ensuring that it is able to sustain its operations by looking at some of the indicators in the market that have a chance to influence its performance positively and those that are not bound to have any desirable effect.