Download Demand Analysis

Professional Data Analysis
DR HAB.. EWA KUSIDEŁ
F112, TUESDAY 10.00-11.30
LECTURE NO 4
[email protected]
Homework
 Let’s imagine the tosters (from problem and project
task) are a snobish good and that quantity demanded
is contrary of the above (i.e. 5,6,7,8,9,10 at a price of
10,12,14,16,18,20).




What is the sign of correlation coeficient between price and
demand? What is shape of demand curve?
Is the power of correlation coeficient high?
Estimate the parameters of the demand curve
Calculate and interpret parameters of new demand curve
Anwers to the problem and project task
Demand
Interpretation of demand curve
• What is the sign of correlation coeficient
• If x (price) grows (falls) by 1 unit (1
between price and demand? - negative
pound) then y (demand) falls
• Is the power of correlation coeficient
(grows) by 0,5 unit (millions of
high? – very high
pieces)
• Estimate the parameters of the demand
• What happens to the demand (y)
curve – y=-0,5x+15
when price falls by 2 pounds.
• The demand increases (grows) by
1unit (million of pieces)
• If price increases by 5 units then
12
demand decreases by 2,5.
10
• What should we do with the price if
8
y = -0,5x + 15
we want to increase our demand by
6
2 units. The price must decrease by
4
4 units.
2
0
0
5
10
Price
15
20
25
Relationship between two variable
y=α0 + α 1x + 
where:
y- explained variable, left-hand side variable
x- explanatory variable, right-hand side variable,’
- disturbance term (error, random, stochastic
disturbance term)
α 0, α1 -structural parameters of equation
Beta coeficient in finance
Beta (β) is a measure of the volatility, or systematic risk, of a
security or a portfolio in comparison to the market as a whole.
Beta is used in the capital asset pricing model (CAPM), which
calculates the expected return of an asset (x) based on its beta
and expected market returns (x).
y=α0 + βx + 
https://www.youtube.com/watch?v=jvk-Lkwd6S4
Beta interpretation
A beta of 1 indicates that the security's price
moves with the market.
A beta of less than 1 means that the security is
theoretically less volatile than the market.
A beta of greater than 1 indicates that the
security's price is theoretically more volatile than
the market.
http://www.money.pl/gielda/archiwum/indeksy/
Example
For example, if a stock's beta is 1.2, it's theoretically 20% more
volatile than the market. Conversely, if beta is 0.65, it is
theoretically 35% less volatile than the market.
Many utilities stocks have a beta of less than 1. Conversely, most
high-tech, Nasdaq-based stocks have a beta of greater than 1,
offering the possibility of a higher rate of return, but also posing
more risk
Example from polish stock market
2016-08-26
2016-08-29
2016-08-30
2016-08-31
2016-09-01
2016-09-02
2016-09-05
2016-09-06
2016-09-07
2016-09-08
2016-09-09
2016-09-12
2016-09-13
2016-09-14
2016-09-15
2016-09-16
2016-09-19
2016-09-20
2016-09-21
2016-09-22
2016-09-23
2016-09-26
2016-09-27
2016-09-28
2016-09-29
2016-09-30
2016-10-03
2016-10-04
2016-10-05
2016-10-06
2016-10-10
2016-10-11
2016-10-12
2016-10-13
2016-10-14
2016-10-17
2016-10-18
2016-10-19
2016-10-20
2016-10-21
2016-10-24
2016-10-25
2016-10-26
2016-10-27
2016-10-28
2016-10-31
2016-11-02
2016-11-03
2016-11-04
WIG 20 LPP
1776
1777
1798
1794
1762
1768
1788
1791
1810
1793
1754
1731
1728
1737
1746
1734
1750
1756
1758
1776
1762
1740
1733
1735
1730
1710
1725
1754
1762
1762
1766
1757
1760
1728
1720
1714
1721
1745
1749
1752
1783
1786
1780
1795
1818
1815
1766
1767
1758
WIG 20 % LPP %
4570
4540
4719
4780
4548
4232
4310
4320
4200
4290
4141
4133
4146
4186
4161
4049
3950
3911
3922
3973
3910
3822
3820
3860
3970
3943
3935
4500
5100
4953
5039
5001
5025
5075
5066
5200
5100
5489
5800
5605
5730
6004
5770
5663
5610
5666
5880
5991
5616
0,1%
1,2%
-0,3%
-1,8%
0,3%
1,2%
0,2%
1,1%
-0,9%
-2,2%
-1,3%
-0,2%
0,5%
0,5%
-0,7%
0,9%
0,3%
0,2%
1,0%
-0,8%
-1,3%
-0,4%
0,1%
-0,2%
-1,2%
0,9%
1,7%
0,5%
0,0%
0,2%
-0,5%
0,2%
-1,9%
-0,5%
-0,3%
0,4%
1,4%
0,3%
0,2%
1,7%
0,2%
-0,3%
0,9%
1,3%
-0,2%
-2,7%
0,1%
-0,5%
-0,7%
3,9%
1,3%
-4,9%
-7,0%
1,9%
0,2%
-2,8%
2,1%
-3,5%
-0,2%
0,3%
1,0%
-0,6%
-2,7%
-2,4%
-1,0%
0,3%
1,3%
-1,6%
-2,2%
-0,1%
1,0%
2,8%
-0,7%
-0,2%
14,4%
13,3%
-2,9%
1,7%
-0,8%
0,5%
1,0%
-0,2%
2,6%
-1,9%
7,6%
5,7%
-3,4%
2,2%
4,8%
-3,9%
-1,9%
-0,9%
1,0%
3,8%
1,9%
-6,3%
20.0%
y = 1,2518x + 0,0053
15.0%
10.0%
5.0%
-3.0%
-2.0%
-1.0%
0.0%
0.0%
-5.0%
-10.0%
1.0%
2.0%
beta LPP=1,25 interpretation
 LPP=1,25*WIG20+0,0083
If WIG20 grows (falls) by 1% then LPP grows (falls) by
1,25%.
LPP is recommended for investors with high risk
appetite.
Homework (paper version)
Calculate beta parameter for chosen stock from
polish stock market.
2. Decide whether the stock is for aggressive (high
risk appetite) or defensive (low risk appetite)
investor.
3. Interpret beta parameter.
1.