Is this Normal?
One theory about the daily changes in the closing price of a stock is that these changes follow a random walk – that is, these daily events
are independent of each other, and move upward or downward in a random manner – and can be approximated by a normal distribution
(Smith, 2020). To test this theory, you will collect the most recent closing prices of stocks from your favorite company or brand and see
if this is truly the case.
Main Post:
1. Choose your favorite company or brand and search finance.yahoo.com for the company’s name and “historical stock prices”.
2. Download the stock history for this company for the past 6 weeks by selecting the appropriate dates and clicking on
“Download to Spreadsheet” at the bottom of the page.
3. Calculate the daily stock change in the closing stock prices by
taking the difference between the closing and opening price for
the day.
4. Run the Descriptive Statistics->Summary Statistics, available in
the Excel Data Analysis Tools, or use the individual Excel functions
to calculate the measures listed below for the daily stock change.
Share the summary table or the following descriptive measures
for the daily stock change:
o minimum
o maximum
o median
o mean
o sample standard deviation.
5. Calculate the 1st and 3rd quartiles of the daily stock change.
6. Share the 5-number summary.
7. Create and post a Box & Whiskers Plot using your 5-number
summary.
8. Look at your box and whisker plot.
o State which of the following best describes the shape?
? right skewed (median < mean) ? left skewed (mean < median) ? symmetric (mean ? median) o Based on the description of the shape, explain why you would or would not consider your daily stock change to be normally distributed. Peer Reply 1: Read a classmate's thread. Consider investing in your classmate's stock and assume that the daily stock price change is normally distributed. Using the Normal Distribution Excel Template (mean - sample size is one workbook) found in the Unit 4 LiveBinder and using your classmate's mean and standard deviation: 1. Calculate and state a 1% value of the stock on day 1. 2. Determine the probability for the daily stock change of: o the value of the stock decreasing by 1%. (X < 1% of the value of the stock) o the value of the stock increasing by 1%. (X > 1% of the value
of the stock)
3. Explain in your own words if these are high or low likelihoods for
change.
Peer Reply 2:
Read a different classmate’s thread.
•
•
Consider investing in your classmate’s stock. If you wanted to be
95% sure what the daily stock change would be, what range for a
daily stock change would you expect? Use the Normal
Distribution Excel template found in the Unit 4 LiveBinder to
calculate the range.
Volatility is something that can also be examined by comparing
the potential change to the overall price. In this situation, the
volatility would be the range of the 95% confidence interval
divided by the initial value of the stock. What is the volatility for
this stock as described?

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