Analysis Using standard Deviation

ANALYSIS USING STANDARD DEVIATION

Data Analysis:

Bankex Sector(BSE)

Initially the historical daily price data for four banks i.e.ICICI bank,IDBI bank,IndusInd bank,Ing Vyasa bank for the last 5 years was collected.Then the standard deviation for the percentage change in the closing prices was calculated.(Refer appendix 1).

FTSE100 Index

For this analysis,the historical daily price data on FTSE100 index from the year 1995 to 2006 was collected.Then the standard deviation of the percentage change of closing prices was calculated.(Refer to appendix 1)

Observations:

Bankex Sector(BSE)

Refer to appendix 1

• The values of standard deviation are in the range of 2%-6%.
• While the values are high in the month of May for all the banks.
• The months of May and June are very much volatile and so very much risky

FTSE100 Index

Refer to appendix 1

• The average yearly standard deviation is 0.96.
• The values of standard deviation for the years from 1997-2003 are very high i.e. in the range of 0.9-1.5 (refer to appendix 1).It means volatility was very high in those years.
• Especially in the year 2001 and 2002 the values of standard deviations are respectively 1.268 and 1.544 which are relatively high.
• Since the major events like terrorist attack on world trade centre in 2001 and corporate scandals in 2002 impacted stock market in a bad manner.So these effects are reflected in the values of standard deviation.
• The average monthly standard deviation is also 0.96.
• In September 2001 the value of standard deviation is 2.386 while in July 2002 this value is 3.152.
• The terrorist attack on WTO was happened on 11^th September 2001,while the corporate scandals such as Enron and world com happened in July 2002.So the fluctuation in the stock prices was very high in those months of the respective year.
• Then the values again declined and are in the range of 0.5-0.75 for the year 2004-2006.
• There is not much deviation among the values of standard deviation for these 3 years.Because economy of Britain is doing well in these years.