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Event analysis

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Event analysis

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Event analysis

Introduction

According to Dreman & Berry, (1995, pp21-36), There are multiple argument concerning the effects of announcement on the stock prices, such events usually attract a lot of attention. There are also arguments that such events attract the attention of speculators thereby increasing stock volatility. Events may mean a lot to the shareholder and the potential investors. Such events usually lead to increased activity in the stock of the companies in question and may either mean convenience or detrimental depending on the nature of the company (Harris, 1986; Ho, 1998; Jaffe, 1974).

Company information

BP and shell are both global; company dealing in oil and gas, with its presence in 80 countries around the world. The companies’ main products include gasoline, energy and other petrochemical products. The companies are operating two main segments in the petrochemical sector: Exploration & Production. And Refining & Marketing. Under exploration and production, the company explores for oil and natural gas, develops oil nd gas fields, midstream transportation, storage and processing., The company trades natural gas, liquefied natural gas, power and natural gas liquids. However, on the refining and marketing segments, the company supply and trades, refining, manufactures, markets and transports crude oil, petroleum and petrochemicals products. Recent activities include the acquisition of 83% of Companhia Nacional de Acucar e Alcool in April 2011, as well as the acquisition of Verenium’s lignocellulosic biofuels business in 2010

The company financials report as at 3rd march include:

Prev Close: 47.84

Open: 47.42

Bid: 46.26 x 100

Ask: 55.00 x 1000

1y Target Est: 52.93

Beta: 1.8

Next Earnings Date: N/A

Day’s Range: 47.28 – 47.69

52wk Range: 33.62 – 49.09

Volume: 6,740,414

Avg Vol (3m): 7,587,520

Market Cap: 150.24B

P/E (ttm): 5.89

EPS (ttm): 8.06

Div & Yield: 1.92 (4.00%

Shell

DETAILS

Previous Close 73.62

Open 72.90

Day’s High 73.00

Day’s Low 72.51

Volume 1.87 Mil

Avg Daily Vol (13 Wks) 2.71 Mil

Bid 72.01

Bid Size 1,000

Ask 73.78

Ask Size 1,000

52-Wk High 77.97

52-Wk Low 57.97

Dividend Rate 3.36

Yield 4.62

Normality plot of the bp shares

Descriptive statistics for the bp data

Anderson-Darling A-Squared 2.802

p 0.000

95% Critical Value 0.787

99% Critical Value 1.092

Mean 604.298

Mode 581.1, 579, 587, 573.7, 641.1

Standard Deviation 25.909

Variance 671.280

Skewedness 0.194

Kurtosis -1.314

N 116.000

Minimum 560.000

1st Quartile 581.100

Median 600.800

3rd Quartile 628.503

Maximum 655.400

Confidence Interval 4.765

for Mean (Mu) 599.533

0.95 609.063

For Stdev (sigma) 22.950

29.752

for Median 588.700

612.000

Objectives of the study:

The main objectives of this study are:

To examine the effects of announcement on underlying stock prices

To determine whether the companies’ announcement are legitimate news or terrible news

Data and Technique

The data for the two companies are used are based on a number of common assumptions about the

T test for Shell

t-Test 1-sample Test Mean 1889.75 Confidence Level 0.95 N 112 Average 1889.75 Test Stdev p 1-sample Stdev Stdev 151.0336 151.0336 0.964 SE Mean 14.27133 T 0.000 TINV 1.658697 p – One sided 0.5 Accept Null Hypothesis because p > 0.05 (Means are the same)

p – two sided 1 Accept Null Hypothesis because p > 0.05 (Means are the same)

T test bp

t-Test 1-sample Test Mean 604.2978 Confidence Level 0.95 N 116 Average 604.2978 Test Stdev p 1-sample Stdev Stdev 25.90908 25.90908 0.965 SE Mean 2.405598 T 0.000 TINV 1.658212 p – One sided 0.5 Accept Null Hypothesis because p > 0.05 (Means are the same)

p – two sided 1 Accept Null Hypothesis because p > 0.05 (Means are the same)

It is imperative to know that the standards levels of t statistics are as shown below:

level One tailed Two tailed

1% 2.33 2.55

5% 1.66 1.95

10% 0.97 1.25

We set the day that the company released the information’s defined as day zero, then the daily returns for the first 30 days is calculated to determine the linearity of the data. This is as shown below:

Rit the 30 days around the first day “zero”: t = -30, -29,…-1, 0, 1,…, 29, 303

Then it is also advisable to calculate the total daily returns Rmt, for these days on the market of another firms, either Shall or BP. However, this may be done to compare group of companies having the same risk or operating in the same industry. The returns can however, be easily adjusted for market performance as well as risks. This will help in getting the excess returns for both Shell and BP during the period. For example, when the CAP model (capital assets pricing model) was used for controlling risk (Aitken, 2000, p 5)

Then the abnormal returns are defined as differences ARit= Rit–Rmt5

Then finally the average of the abnormal returns is calculated overall the N events in the whole sample:

The Cumulate the returns that are given for the first T days to CAAR are calculated:

From mother studies, there is enough proof that during the pre announcement the reaction from then investors varies in form from the reaction of the investors during post announcements. The preannouncement drifts that occur prior to the earning are usually because of insider trading. This is always against the strong for efficiency. However during the post announcement drift the reaction of the investors are against the semi strong form (MacKinlay, 1997).

Kabir, & Vermaelen (1996, pp 1591–160) states that, the t statistics is useful for determining if the excess returns during the announcements are very different from zero. This was arrived at by getting the t statistics for all the values of n and dividing the average excess returns by some predetermined standard error

T statistic (excess return/day t) = Average Excess Return / Standard Error

If the t statistics are statistically significant, the event affects returns; the sign of the excess return determines whether the effect is positive or negative.

Abnormal returns

When announcement are made most investors try to determine whether announcement are good for the company or bad for the same company: in the case we should determine whether the company had registered returns on the day of the announcements (Manne, 1966).

We assume that then return of the company on the day of announcements was 0.5. Further investigation finds that the returns for the same companies over the past 3 months were 0.3 on the business day. And the S&P INDEX had risen by 0.4%. Additionally, the CAPM estimated coefficient was found to be a=-0.1% and b=1.1.what was the response of the investors on the announcements (Barber, Griffin, and Baruch, 1994, p 23: Lorie, &. Neiderhoffer, 1968, pp 35-51: Kwong, &, Wong, (1984, pp, 905–917).

Market-adjusted abnormal returns

086995

First we compute the original abnormal return for the announcement using the market-model, this is based on a number of factors amongst them the date of announcement, the nature of the company and performance of the company in prior events

11176018415

31222956350Then we use the market market-adjusted model:

1963420271145Then the mean adjusted model:

Conclusion

Is the market efficient?

Accordion to Grigori et al, (2008, p3), an efficient market is the market in which the market price is actually the unbiased estimate of the true value of the real investment. In this regard, it is healthy to say that the market is efficient. It also important to note that the market prices of the two companies are biased. Kyle, (1985, pp 1315–1335) enthuses that, this is because the prices are either low or high than the true value. However, it is important to note that the deviation are random and are not easy to determine the degree of randomness, based on the fact that when the stock of BP had more ratios they were overvalued than the stocks of Shell. Finally i would like to say that market efficiency is difficult to state because it depends on the risk adjustment procedure, magnitude of the issues and selection bias, (Dreman, 1998; Ball, 1978, pp 103-126).

Herring, et al, (2010, p 347), argues that, market efficiency is relative as there is likelihood that the market may be efficient o a group of investors and not efficient to other, this explains why the shareholder of BP may view the market as efficient while the investors of shell do not hold the same view. This may only be attributed to the differential tax and transaction cost. These factors confer advantages to some shareholders relative to other.

The efficient of the market makes it difficult for any group of shareholder to beat the market through the same strategy despite the availability of the precise information tom the investors. They cannot consistent find the undervalued stocks. The efficiency of the market makes it difficult for investors to use the price information both current and past to beat the market putting them at disadvantages land leaving them speculating.

From the three analyses, the abnormal return was positive, meaning that the announcement was a good for the investors. In most cases, the abnormal returns and the final cumulative returns for the past 12 months are usually measures of just averages. They are also the cumulative effects of the announcements on the made by the company; this is also same to the dividend and earnings announcements

Bibliography

Grigori Erenburg, Janet Kiholm Smith, and Richard L. Smith, (2008). “The Paradox of‘Fraud-on-the-Market Theory’: Who Relies on the Efficiency of Market Prices?”, Working Paper, 12.

Brad M. Barber, Paul A. Griffin, and Baruch Lev1994., “The Fraud-on-the-Market Theory and Indicators of Common Stocks’Efficiency,” The Journal of Corporation Law,

Aitken C.G.G. (2000), “Interpretation of Evidence, and Sample Size Determination,” in Joseph L. Gastwirth, ed., Statistical Science in the Courtroom,

Lorie, J., and V. Neiderhoffer (1968): “Predictive and Statistical Properties of Insider Trading,” Journal of Law and Economics, 11, 33–51.

MacKinlay, A. C. (1997): “Event Studies in Economics and Finance,” Journal of Economic Literature, 35, 13–39.

Manne, H. G. (1966): Insider Trading and the Stock Market. The Free Press, New York.

Harris, L. (1986): “Cross-Security Tests of the Mixture of Distributions Hypothesis,” Journal of Financial and Quantitative Analysis, p. 39.

Ho, B. M. (1998): Public Companies and their Equity Securities: Principles of Regulation under Hong Kong Law. Klumer Law International, London.

Jaffe, J. F. (1974): “Special Information and Insider Trading,” Journal of Business, 47, 410–428.

Kabir, R., and T. Vermaelen (1996): “Insider Trading Restrictions and the Stock Market: Evidence from the Amsterdam Stock Exchange,” European Economic Review, 40, 1591–1603.

Kwong, K. S., and K. A. Wong (1984): “The Behavior of Hong Kong Stock Prices,” Applied Economics, 16, 905–917.

Kyle, A. (1985): “Continuous Auctions and Insider Trading,” Econometrica, 53, 1315–1335.

Herring, Richard; Diebold, Francis X.; Doherty, Neil A. (2010). The Known, the Unknown, and the Unknowable in Financial Risk Management: Measurement and Theory Advancing Practice. Princeton, N.J: Princeton University Press. p. 347.

Dreman David N. & Berry Michael A. (1995). “Overreaction, Underreaction, and the Low-P/E Effect”. Financial Analysts Journal 51 (4): 21–30.

Ball R. (1978). Anomalies in Relationships between Securities’ Yields and Yield-Surrogates. Journal of Financial Economics 6:103-126

Dreman D. (1998). Contrarian Investment Strategy: The Next Generation. Simon and Schuster.

Dolls House By Ibsen (Essay)

Doll’s House By Ibsen (Essay)

Section: English Essays

“A Doll’s House” is classified under the “second phase” of Henrik Ibsen’s career. It was during this period which he made the transition from mythical and historical dramas to plays dealing with social problems. It was the first in a series investigating the tensions of family life. Written during the Victorian era; the controversial play featuring a female protagonist seeking individuality stirred up more controversy than any of his other works. In contrast to many dramas of Scandinavia in that time which depicted the role of women as the comforter, helper, and supporter of man, “A Doll’s House” introduced woman as having her own purposes and goals. The heroine, Nora Helmer, progresses during the course of the play eventually to realize that she must discontinue the role of a doll and seek out her individuality. David Thomas describes the initial image of Nora as that of a doll wife who revels in the thought of luxuries that can now be afforded, who is become with flirtation, and engages in childlike acts of disobedience (259). This inferior role from which Nora progressed is extremely important. Ibsen in his “A Doll’s House” depicts the role of women as subordinate in order to emphasize the need to reform their role in society. Definite characteristics of the women’s subordinate role in a relationship are emphasized through Nora’s contradicting actions. Her infatuation with luxuries such as expensive Christmas gifts contradicts her resourcefulness in scrounging and buying cheap clothing; her defiance of Torvald by eating forbidden Macaroons contradicts the submission of her opinions, including the decision of which dance outfit to wear, to her husband; and Nora’s flirtatious nature contradicts her devotion to her husband. These occurrences emphasize the facets of a relationship in which women play a dependent role: finance, power, and love. Ibsen attracts our attention to these examples to highlight the overall subordinate role that a woman plays compared to that of her husband. The two sides of Nora contrast each other greatly and accentuate the fact that she is lacking in independence of will. The mere fact that Nora’s well-intentioned action is considered illegal reflects woman’s subordinate position in society; but it is her actions that provide the insight to this position. It can be suggested that women have the power to choose which rules to follow at home, but not in the business world, thus again indicating her subordinateness. Nora does not at first realize that the rules outside the household apply to her. This is evident in Nora’s meeting with Krogstad regarding her borrowed money. In her opinion it was no crime for a woman to do everything possible to save her husband’s life. She also believes that her act will be overlooked because of her desperate situation. She fails to see that the law does not take into account the motivation behind her forgery. Marianne Sturman submits that this meeting with Krogstad was her first confrontation with the reality of a “lawful society” and she deals with it by attempting to distract herself with her Christmas decorations(16). Thus her first encounter with rules outside of her “doll’s house”results in the realization of her naivety and inexperience with the real world due to her subordinate role in society. The character of Nora is not only important in describing to role of women, but also in emphasizing the impact of this role on a woman. Nora’s child-like manner, evident through her minor acts of disobedience and lack of responsibility compiled with her lack of sophistication further emphasize the subordinate role of woman. By the end of the play this is evident as she eventually sees herself as an ignorant person, and unfit mother, and essentially her husband’s wife. Edmond Gosse highlights the point that “Her insipidity, her dollishness, come from the incessant repression of her family life (721).” Nora has been spoon-fed everything she has needed in life. Never having to think has caused her to become dependent on others. This dependency has given way to subordinateness, one that has grown into a social standing. Not only a position in society, but a state of mind is created. When circumstances suddenly place Nora in a responsible position, and demand from her a moral judgment, she has none to give. She cannot possibly comprehend the severity of her decision to borrow money illegally. Their supposed inferiority has created a class of ignorant women who cannot take action let alone accept the consequences of their actions. “A Doll’s House” is also a prediction of change from this subordinate roll. According to Ibsen in his play, women will eventually progress and understand her position. Bernard Shaw notes that when Nora’s husband inadvertently deems her unfit in her role as a mother, she begins to realize that her actions consisting of playing with her children happily or dressing them nicely does not necessarily make her a suitable parent (226). She needs to be more to her children than an empty figurehead. From this point, when Torvald is making a speech about the effects of a deceitful mother, until the final scene, Nora progressively confronts the realities of the real world and realizes her subordinate position. Although she progressively understands this position, she still clings to the hope that her husband will come to her protection and defend her from the outside world once her crime is out in the open. After she reveals the “dastardly deed” to her husband, he becomes understandably agitated; in his frustration he shares the outside world with her, the ignorance of the serious business world, and destroys her innocence and self-esteem. This disillusion marks the final destructive blow to her doll’s house. Their ideal home including their marriage and parenting has been a fabrication for the sake of society. Nora’s decision to leave this false life behind and discover for herself what is real is directly symbolic of woman’s ultimate realization. Although she becomes aware of her supposed subordinateness, it is not because of this that she has the desire to take action. Nora is utterly confused, as suggested by Harold Clurman, “She is groping sadly in a maze of confused feeling toward a way of life and a destiny of which she is most uncertain (256).” The one thing she is aware of is her ignorance, and her desire to go out into the world is not to “prove herself” but to discover and educate herself. She must strive to find her individuality. That the perception of woman is inaccurate is also supported by the role of Torvald. Woman is believed to be subordinate to the domineering husband. Instead of being the strong supporter and protector of his family, Nora’s husband is a mean and cowardly man. Worried about his reputation he cares little about his wife’s feelings and fails to notice many of her needs. The popular impression of man is discarded in favor of a more realistic view, thus illustrating society’s distorted views. Ibsen, through this controversial play, has an impact upon society’s view of the subordinate position of women. By describing this role of woman, discussing its effects, and predicting a change in contemporary views, he stressed the importance of woman’s realization of this believed inferiority. Woman should no longer be seen as the shadow of man, but a person in herself, with her own triumphs and tragedies. The exploration of Nora reveals that she is dependant upon her husband and displays no independent standing. Her progression of understanding suggests woman’s future ability to comprehend their plight. Her state of shocked awareness at the end of the play is representative of the awakening of society to the changing view of the role of woman. “A Doll’s House” magnificently illustrates the need for and a prediction of this change.

Event analysis of BP and shell