Download Course Outline - Department of Statistics, CUHK

STA4001 Applications of Statistics in Business
September 2002
Instructor: Professor Poon Wai-Yin (LSB114)
Teaching Assistants:
Mr. Lu Bin (LSB130)
Mr Shea Hon Wai (LSBG19)
Miss Tsui Yuen Yee (LSBG26)
Course Description:
The aim of this course is to develop students’ ability in applying statistical methods to
problems pertaining to business. Topics include basic methods in investment
appraisal, sensitivity analysis, simulation, introduction to risk and return, basic
portfolio theory, market model, capital asset pricing model, marketing research design
process, the use of decision tree to assess the value of information, cluster analysis,
and CPM/PERT analysis.
Assessment Scheme:
Assignment:
Mid-term Examination:
Final Examination:
15%
35% (15 October, 2002)
50%
Major References: (Additional references will be provided in class notes.)
Chapter 1 to Chapter 4:
Brealey, R.A. & Myers, S.C. (1991). Principles of Corporate Finance. McGraw Hill.
Samuels, J.M., Wilkes, F.M. & Brayshaw, R.E. (1990). Management of Company
Finance. Chapman & Hall.
Chapter 5:
Kotler, P. (1994). Marketing Management: Analysis, Planning, Implementation, and
Control, Prectice-Hall.
Johnson, G. & Scholes K. (1993). Exploring Corporate Strategy: Text and Cases.
Prentice-Hall.
Tull, D.S. & Hawkins, D.I. (1990). Marketing Research: Measurement & Methods.
(5th Edition), Maxwell Macmillan.
Kinner, T.C. & Taylor, J.R. (1991). Marketing Research: An Applied Approach.
McGraw-Hill.
Chapter 6:
Johnson, R.A. & Wichern, D.W. (1988). Applied Multivariate Statistical Analysis.
Prentice-Hall.
Chapter 7:
Moore, L.J., Lee, A.M. & Taylor, B.W. (1993). Management Science. Alyn & Bacon.
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Course Outline:
Part I: Finance
Chapter 1: An Introduction
Chapter 2: Investment Appraisal: Basic Methods
1. Introduction
2. Cash flows and the time value of money
3. Present value
4. Annuities and perpetuities
5. Real life application 1: Calculating mortgage repayments
6. Real life application 2: Effective rate of interest in hire purchase
7. Real life application 3: Interest rates in local tax loan plans
8. Alternative investment criteria
(1) Payback
(2) IRR
(3) Profitability index & benefit-cost ratio
9. Sensitivity analysis
10. Single-investment risk analysis
11. Simulation
Chapter 3: Introduction to Risk and Return
1. Introduction
2. Measures of investment return and risk
(1) Measurement of single-period return
(2) Expected returns and measure of risk
3. Return and risk of combining investments
(1) Portfolio with two securities
(2) Implications of very large portfolios
4. The market model
(1) The model
(2) Diversification
Chapter 4: Portfolio Theory and Capital Asset Pricing Model
1. Introduction
2. Analysis of two-asset portfolio
3. Extension to a multi-asset portfolio
4. Risk-free asset combined with risky securities
5. Capital asset pricing model (CAPM)
6. Stock market in Hong Kong
6. Case study: Forecasting the share price of HSBC
7. Market efficiency
(1) What is an efficient market?
(2) Three forms of the efficient market theory
(3) A case study
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Part II: Quantitative Management Techniques
Chapter 5: The Value of Information
1. The decision theory approach
(1) Major steps in a decision theory analysis
(2) Expected monetary value criterion (EMV)
(3) Expected utility value criterion (EUV)
2. Prior analysis
(1) Decision trees
(2) Expected monetary value of perfect information (EMVPI)
3. Posterior analysis
(1) Bayes’ Theorem recalls
(2) An example of posterior analysis
4. Preposterior analysis
5. Advantages and limitations
Chapter 6: Cluster Analysis
1. Introduction
2. Proximity measures
(1) Similarity
(2) Dissimilarity
(3) Measure of distance
(4) Construct similarities from distances
(5) Similarity coefficients for binary variable
(6) Similarities and association measures for pairs of variables
(7) Concluding comments on similarity
3. Hierarchical agglomerative methods
(1) Clustering methods
(2) Steps in the agglomerative hierarchical clustering algorithm
(3) Single linkage method
(4) Complete linkage method
(5) Average linkage
4. Final Comments
Chapter 7: CPM/PERT
1. Introduction
2. Network construction
(1) Network components and precedence relationships
(2) Concurrent and dummy activities
3. Network analysis
(1) Earliest event time
(2) The project duration
(3) The critical path
(4) Latest event time
(5) Slack
(6) Computerized CPM/PERT analysis
(7) A case study
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4. PERT
(1) Probabilistic activity times
(2) Probability statements about project completion times
5. Project planning and control
(1) The forward load on resources
(2) Project control: updated network analysis
(3) Cost control
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