Investment Analysis and Portfolio Management

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Investment Analysis and Portfolio Management
Date: May 18, 2011|

1. Impact of various causative factors on the three indicators: According to the observation of the past one-month, it infers that DJIA and NASDAQ Index fluctuate to grow, and 10-year Treasury Note Yield fell down. After analyze the daily causative factors, I find several parts influence the indicators. Most of all, the whole economic trend is the most important impact of various causative factors. The three indicators are all in terms of the economic trends. As the economic is recovering from the financial crisis, DJIA is going up from 12381.11 to 12638.74; NASDAQ goes up from 2771.51 to 2827.56. But 10-year Treasury Note Yield ease as the as the economy recovers. Besides, government can adjust the indicators so that the economic would be regulated and controlled. The indicators are references of the economic. When the indicators imply sluggish stock market, Federal Reserve would set up a series of policies such as adjust the Interest ratios to adjust the economic market. Federal Reserve implements new policy to slash the deficit, then DJIA and NASDAQ drifted slightly. In additional, some data recorded by the agencies would also affect the indicators. For example, the employment rates, inflation rates, GDP, CPI, etc. can all influence the indicators. And the market price is also an important factor. Prices of crude oil, metal, gold and some other major products of main industries can affect the indicators as well. The indicators always fluctuate as the prices rise and down. The stock indexes increase as the oil price goes up. And as oil price slumps, the indexes fall down. And unemployment rates infer the stock indexes decrease. Of course, international factors cannot be forgotten. Policies of all over the world, the global economics, and the complex and volatile international situations are all important factors. For example, Libya’s upheaval affects that the oil price booms and the stock market go up. And the earthquake in Japan inducts the decrease of the stock indexes. Besides, the fluctuation of currency and exchange rate also decide the status of the indicators. As US dollar tumble, all the three indicators drop down. In a word, local economics and international situations can be the most important effects of the indicators, and they can be greatest effect factor of the indicators. And policies of Federal Reserve and other agencies and other countries also are important factors. Finally, market prices and all kinds of data can also affect them.

2. The relationship between the three indicators.
DJIA is an important index that many people watch to get an indication of how well the over all stock market is performing, while NASDAQ is mainly for electronic exchange. The correlation coefficient between DJIA and NASDAQ is 0.863, which over than 0.8. The number is so high so they have strong relationships between each other. And the relationship is positive. When DJIA booms, NASDAQ increase as well. The correlation coefficient between DJIA and 10-year T-Note is 0.554, which is also higher than 1, infers positive correlation. But they have lower relationships than the first two indicators. Finally, the correlation coefficient between NASDAQ and 10-year T-Note is 0.582, also indicates strong relationships. But they are less than the first two as well.


Date| DJIA| %Chang| NASDAQ| %Chang| 10-year T-note Yield| %Chang| 4/11/2011| 12381.11| 0.01%| 2771.51| -0.32%| 3.57| 0.00%| 4/12/2011| 12263.58| -0.95%| 2744.79| -0.96%| 3.50| -1.96%| 4/13/2011| 12270.99| 0.06%| 2761.52| 0.61%| 3.47| -0.86%| 4/14/2011| 12285.15| 0.12%| 2760.22| -0.05%| 3.48| 0.29%| 4/15/2011| 12341.83| 0.46%| 2764.65| 0.16%| 3.41| -2.01%| 4/18/2011| 12201.59| -1.14%| 2735.38| -1.06%| 3.37| -1.17%| 4/19/2011| 12266.75| 0.53%| 2744.97| 0.35%| 3.36| -0.30%|...
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