Comparison of EPS between Dow Jones Industrials and NASDAQ - Research Paper Example

Comparison of EPS between Dow Jones Industrials and NASDAQ Research Project Introduction to Statistics Bahrain Institute of Banking and Finance YourName Table of Contents Introduction 3 Claim 3 Data Collection (including Sampling Procedure) 3 Sample Data 5 Data Analysis and Results 6 Summary Statistics of the Sample Data 6 Graphical Representation of the Sample Data 8 Comparison of EPS between DJI and NASDAQ 9 Conclusion 11 Summary 12 Comparison of EPS between Dow Jones Industrials and NASDAQ (Research Project) Introduction The Dow Jones Industrial (Denoted as DJI) is a stock market index that shows how 30 large publicly owned companies based in the United States trade in the stock market. It is also called the Dow Jones Industrial Average, the Industrial Average, the Dow Jones, the Dow 30, or simply the Dow. The NASDAQ stock market, commonly known as the NASDAQ, is an American stock exchange. At present there are about 2,579 companies are listed on it. Since, the Dow Jones shows the stocks of 30 large publicly owned companies, therefore, it is expected that the earnings per share (EPS) for the Dow Jones stocks will be greater than the earnings per share for the NASDAQ stocks. This paper will investigate whether the mean earnings per share (EPS) for the Dow Jones Industrials (DJI) stocks are greater than for the NASDAQ stocks. Claim The mean earnings per share for the Dow Jones stocks are greater than for the NASDAQ stocks. Data Collection (including Sampling Procedure) One of the best places for collecting financial data is Yahoo Finance website. The URL for the website is given by http://finance.yahoo.com/. The earnings per share data for both the 30 stocks listed on the Dow Jones Industrials and a random sample of 30 stocks traded on the NASDAQ were collected from Yahoo Finance on 24 April, 2014. From the Yahoo Finance website, the Dow Jones component link (http://finance.yahoo.com/q/cp?s=%5EDJI+Components) was clicked and the page showing complete 30 stocks list is opened. From here, each company symbol (link) is clicked and the EPS value is noted for each stock. Screenshot 1 shows a portion of the complete list of the Dow Jones stocks and details about one of the stocks Apple Inc. Similarly, the EPS value of all the 30 stocks is noted. SCREENSHOT 1: Data Collection procedure for Dow Jones Industrials Stocks From the Yahoo Finance website, the NASDAQ component link (http://finance.yahoo.com/q/cp?s=%5EIXIC+Components) was clicked and the page showing first 50 stocks list of the total 2,579 stocks is opened. Since, we are required to select a random sample of 30 stocks and there are a total of 2579 stocks listed on the NASDAQ, therefore, for choosing a random sample of 30 stocks, every 1st stocks from the list of 50 stocks is selected (1, 51, 101, 151…. etc.). In other word, from every page showing a list of 50 stocks, only the first stocks is selected and its EPS value is noted. Screenshot 2 shows a portion of the first 50 list of the NASDAQ stocks (first page of the component list) and details about one of the stocks American Airlines Group Inc.. SCREENSHOT 2: Data Collection procedure for Dow Jones Industrials Stocks Sample Data Table 1 shows the earnings per share for the 30 stocks listed as the Dow Jones Industrials and a random sample of 30 stocks traded on NASDAQ. TABLE 1: 30 stocks listed as the DJI and random sample of 30 stocks traded on NASDAQ Dow Jones Industrials NASDAQ Name EPS Name EPS Apple Inc. $7.39 American Airlines Group Inc. $3.93 American Express Company $5.71 Autodesk, Inc. $0.35 The Boeing Company $7.99 Analogic Corporation $2.56 Caterpillar Inc. $5.88 Sphere 3D Corp. -$0.53 Cisco Systems, Inc. $1.67 Astrotech Corp $0.85 Chevron Corporation $10.14 Bioanalytical Systems Inc. -$0.03 E. I. du Pont de Nemours and Company $3.50 Builders FirstSource, Inc. $0.18 The Walt Disney Company $4.50 BroadVision, Inc. -$1.98 General Electric Company -$0.14 Cellular Biomedicine Group Inc. -$1.79 The Goldman Sachs Group, Inc. $18.98 Cancer Genetics, Inc. -$1.80 The Home Depot, Inc. $4.71 Comcast Corporation $3.20 International Business Machines Corporation $12.00 Capella Education Co. $3.03 Intel Corporation $2.35 CTI Industries Corp. $0.15 Johnson & Johnson $5.70 Famous Daves of America Inc. $0.40 JPMorgan Chase & Co. $5.46 Dynavax Technologies Corporation -$3.45 The Coca-Cola Company $1.59 Syneron Medical Ltd. -$0.14 McDonalds Corp. $4.46 E*TRADE Financial Corporation $1.00 3M Company $7.49 First Capital Bancorp, Inc. $0.30 Merck & Co. Inc. $4.07 The First Bancorp, Inc. $1.44 Microsoft Corporation $2.48 Global-Tech Advanced Innovations Inc. -$2.60 Nike, Inc. $3.50 Gentex Corp. $1.01 Pfizer Inc. $1.42 Harvard Bioscience Inc. $0.07 The Procter & Gamble Company $3.31 Hologic Inc. $0.18 The Travelers Companies, Inc. $10.70 InterDigital, Inc. $2.62 UnitedHealth Group Incorporated $6.07 INTL FCStone Inc. $1.35 United Technologies Corporation $7.08 Jazz Pharmaceuticals Public Limited Company $0.93 Visa Inc. $2.27 Kandi Technologies Group, Inc. $0.29 Verizon Communications Inc. $2.38 Lincoln Educational Services Corporation -$2.46 Wal-Mart Stores Inc. $5.05 Lightbridge Corp. -$0.31 Exxon Mobil Corporation $7.60 Mountain Province Diamonds Inc. -$0.03 Data Analysis and Results Summary Statistics of the Sample Data Table 2 shows the summary statistics of the sample data. TABLE 2: Summary statistics of the sample data   DJI NASDAQ Mean $5.51 $0.29 Median $4.88 $0.24 Mode $3.50 -$0.03 Standard Deviation $3.85 $1.75 Sample Variance 14.80 3.08 Skewness 1.61 -0.04 Range $19.12 $7.38 Five Number Summary Minimum -$0.14 -$3.45 First Quartile, Q1 $2.69 -$0.27 Median $4.88 $0.24 Third Quartile, Q3 $7.31 $1.01 Maximum $18.98 $3.93 IQR $4.63 $1.28 Graphical Representation of the Sample Data Figure 1 shows the histogram of the Dow Jones Industrials earnings per share and Figure 2 shows the histogram of the NASDAQ earnings per share. FIGURE 1: Histogram of the Dow Jones Industrials earnings per share FIGURE 2: Histogram of the NASDAQ earnings per share Comparison of EPS between DJI and NASDAQ The average earnings per share for the DJI stocks is about $5.51 and varies from the mean by about $3.85. About half of the DJI stocks earnings per share is above $4.88. The range of the earnings per share for the DJI stocks is $19.12 with minimum and maximum earnings per share being -$0.14 and $18.98, respectively. As shown in figure 1, there appears that the earnings per share for the DJI stocks is positively (right) skewed. The average earnings per share for the NASDAQ stocks is about $0.29 and varies from the mean by about $1.75. About half of the NASDAQ stocks earnings per share is above $0.24. The range of the earnings per share for the NASDAQ stocks is $7.38 with minimum and maximum earnings per share being -$3.45 and $3.93, respectively. As shown in figure 3, there appears that the earnings per share for the NASDAQ stocks is approximately normally distributed. Thus, there appears that the mean earnings per share for the Dow Jones stocks are greater than for the NASDAQ stocks. The 5 number summary (Minimum, Q1, Median, Q3, Maximum) for the DJI stocks is (-$0.14, $2.69, $4.88, $7.31, $18.98). The Interquartile range (IQR = Q3 – Q1) value for the DJI stocks is $4.63 indicating middle half of the DJI stocks earnings per share vary by about $4.63. The lower and upper inner fence values for the DJI stocks are calculated as below: Lower Inner Fence = Upper Inner Fence = Lower Outer Fence = Upper Outer Fence = The 5 number summary for the NASDAQ stocks is (-$3.45, -$0.27, $0.24, $1.01, $3.93). The Interquartile range value for the NASDAQ stocks is $1.28 indicating middle half of the NASDAQ stocks earnings per share vary by about $1.28. The lower and upper inner fence values for the NASDAQ stocks are calculated as below: Lower Inner Fence = Upper Inner Fence = Lower Outer Fence = Upper Outer Fence = Figure 3 shows the side-by-side boxplots comparing the DJI and the NASDAQ earnings per share. FIGURE 3: Side-by-side boxplots comparing the DJI and the NASDAQ earnings per share As shown in figure 3, the side-by-side boxplots comparing the DJI and the NASDAQ earnings per share, there appears that the distribution of the Dow Jones Industrials stocks is right skewed with one high outlier and the distribution of the NASDAQ stocks is also right skewed with low and high outliers. Furthermore, the entire boxplot for the NASDAQ stocks is left to the DOW Jones Industrials stocks indicating the mean earnings per share for the Dow Jones stocks are greater than for the NASDAQ stocks. Based on the shapes of the distributions, the five number summary would most accurately summarize the earnings per share for the Dow Jones Industrials and NSDAQ stocks as compared to the mean and standard deviation. This is because the shape of the distributions for both stocks earnings per share is not normal and includes outliers. Conclusion The average earnings per share for the DJI stocks is about $5.51 and varies from the mean by about $3.85. About half of the DJI stocks earnings per share is above $4.88 and middle half of the DJI stocks earnings per share vary by about $4.63. The average earnings per share for the NASDAQ stocks is about $0.29 and varies from the mean by about $1.75. About half of the NASDAQ stocks earnings per share is above $0.24 and middle half of the NASDAQ stocks earnings per share vary by about $1.28. Thus, the sample data indicates that the mean earnings per share for the Dow Jones stocks are greater than for the NASDAQ stocks. Summary In this project, we checked the claim that mean earnings per share for the Dow Jones stocks are greater than for the NASDAQ stocks and found that the claim is true. We also found that the five number summary would most accurately summarize the earnings per share for the Dow Jones Industrials and NSDAQ stocks as compared to the mean and standard deviation. For the Dow Jones Industrials stocks, earnings per share for all 30 listed companies was taken, therefore, in this case no shortcoming in gathering data. However, for the NASDAQ stocks 30 out of 2579 listed companies earning per share data taken randomly for only first 1500 records that is for choosing a random sample of 30 stocks, every 1st stocks from the list of 50 stocks is selected (1, 51, 101, 151…. etc.) and its EPS value is noted. Therefore, the other stocks (1501 to 2579) were not considered and this might be a shortcoming in the method used to gather the NASDAQ stocks data. However, I do not think that the results would have been different if I had bigger sample sizes. This is because the Dow Jones Industrials represents the 30 largest publicly owned companies based in the United States trade in the stock market and NASDAQ represent all the stocks. I did not discover anything that surprised me when I analyzed the data because the results was as it is as expected. If I had to do the project again, I would like it to collect earnings per share for all stocks listed on the NASDAQ and then will select a random sample of 30 stocks from this population. Read More