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Assignment 2

The document analyzes daily stock data for Dr. Reddy’s Laboratories, calculating mean, standard deviation, skewness, kurtosis, and performing the Jarque–Bera test for normality. The results indicate that both the closing price (P_t) and return (R_t) data are not normally distributed, with significant skewness and kurtosis values. The findings suggest that the return series is non-stationary, while the price series is platykurtic and the return series is leptokurtic.

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Jay Vora
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11 views2 pages

Assignment 2

The document analyzes daily stock data for Dr. Reddy’s Laboratories, calculating mean, standard deviation, skewness, kurtosis, and performing the Jarque–Bera test for normality. The results indicate that both the closing price (P_t) and return (R_t) data are not normally distributed, with significant skewness and kurtosis values. The findings suggest that the return series is non-stationary, while the price series is platykurtic and the return series is leptokurtic.

Uploaded by

Jay Vora
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Assignment 2

Vora Jay Bhaveshbhai (21D100023)

Topic: Analysing daily stock data for Dr. Reddy’s Laboratories

Objective:

To calculate the mean, standard deviation, skew, kurtosis and perform Jarque–Bera test of Normality
on the closing price data of Dr. Reddy’s Laboratories.

Calculation:

P_t R_t
Mean 1012.592709 0.000573
Std Deviation 197.1123656 0.0134
Skew 0.335758351 -0.0336
Kurtosis -1.25475832 3.762222

 Here R_t = ln(P_t/P_(t-1))

Plot:

Return data Price data


12 12
10 10
Stock Return

Stock Price

8 8
6 6
4 4
2 2
0 0
0 2 4 6 8 10 12 0 2 4 6 8 10 12
Time (days) Time (days)

Interpretation:

 Mean Return is reasonably higher (0.057% per day) so we can reject the stationarity of R_t
series (the graph is quite dense to observe this from picture). P_t series is clearly non
stationary as mean is 1012.59.
 Standard Deviation for P_t is 197.11 and for R_t is 0.0134.
 Skewness for P_t is 0.3357 and R_t is -0.0336 showing the distribution is reasonably
symmetric.
 P_t is Platykurtic as kurtosis is -0.125 implying it has flatter peak than normal distribution.
 R_t is Leptokurtic as kurtosis is 3.76 implying sharper peak than normal distribution.

Jarque–Bera test of Normality:

 Null Hypothesis (H₀): Data (P_t or R_t) is normally distributed.

 Alternate Hypothesis (H₁): Data (P_t or R_t) is not normally distributed.


 Calculation:
P_t R_t
JB 569.7594405 17.9797
p-value 1.8981E-124 0.000125

 Interpretation:
o P-value is very small for both P_t and R_t hence data is not normally distributed.

Excel sheet is attached along with this document to support the calculations.

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