ERIE COMMUNITY COLLEGE
TITLE III
Basic Skills Project
Interdisciplinary Course Materials
Business Administration
Course: MT001, MT006
Course Outline Topic: Measures of Central Tendency: Mean, Median and Mode
Title: Predicting the Stock Market
Project Description: The student will record the daily average of the DOW or NASDAQ everyday for 2 weeks. Students will then compute the mean, median and mode of their data and record it on a broken line graph. Students will then use their information to make predictions about the future.
Things to Learn Before Starting the Project: how to compute mean, median and mode. They should also know how to graph and interpret line graphs.
Author: Colleen Quinn (Mathematics)
Curriculum Experts: Maryangela Gadikian (Business Administration), Erica Hendra (English)
Semester Created: Spring 2009
Resources: www.nasdaq.com , www.dowjones.com , or www.money.msn.com, answer sheet and excel worksheet.
Contents: I Project sheet
II Introduction and explanation of the Stock Market and the DOW and NASDAQ reports.
III Project Questions
IV Answer Key
V Project Extensions
Name______
Is it possible to predict the Stock Market?
S Stock is a share in the ownership of a company. Companies sell shares of ownership in their company to raise money to finance operations, plan expansion, and so on.
Holding a company's stock means that you are one of the many owners (stockholders or shareholders) of a company and, as such, you have a claim (although usually very small) to everything the company owns. As an owner, you are entitled to your share of the company's earnings.
For various reasons, investors at different times want to sell their stock or buy more stock. Stock prices change every day as a result of market forces. The law of supply and demand takes over. If more people want to buy a company’s stock (demand) than sell it (supply), then the price of that stock goes up. Should more people want to sell a company’s stock than want to buy it, there would be greater supply than demand, and the price would go down.
Shares of stock are bought and sold on a stock exchange. Exchanges are places where buyers and sellers meet and decide on a price. The New York Stock Exchange (NYSE) is the oldest and largest stock exchange in the United States. It is located on Wall Street in New York City. The NYSE uses a large trading floor in order to conduct its transactions. It is here that brokers (who represent the buyers and sellers) meet and shout out prices at one another in order to strike a deal. You can think of these exchanges as an auction place.
Stock exchanges provide an orderly trading place for stock. The exchange does not have to be a physical location, however. There may be no central location or floor brokers whatsoever. Trading may be done through a computer and telecommunications network of dealers. The NASDAQ (National Association of Securities Dealers Automated Quotations) is the most popular exchange of this type. The NASDAQ is becoming a serious competitor to the NYSE. (There are other exchanges in the United States and there are many stock exchanges located in just about every country around the world.)
Chances are you have heard of the NASDAQ Composite or the Dow (the informal name of the Dow Jones Industrial Average or DJIA) or some other market average. Market averages are designed to indicate how companies traded on the stock market are doing in general. (What these averages tell is the general health of stock prices as a whole. If the economy is "doing well," then the prices of stocks as a group tend to rise. If it is "doing poorly," prices as a group tend to fall. The averages show these tendencies in the market as a whole. If a specific stock is going down while the market as a whole is going up, that tells something. Or, if a stock is rising but it is rising faster or slower than the market as a whole, that tells something as well.)
The Dow is one of the most watched indicators of stock market performance. It is an index that shows how certain stocks have traded. It tracks 30 American stocks that are considered to be the leaders of the economy and are on the NASDAQ and NYSE. (Big companies like General Motors, IBM and Exxon are the kinds of companies that make up this index. The companies are chosen to give a broad reflection of corporate industry in the U.S.) The Dow Jones Industrial Average is simply the value of these 30 large, industrial stocks averaged together following a specific formula.
The NASDAQ Composite is a stock market index of all of the common stocks and similar securities listed on the NASDAQ stock market. This means that rather than having 30 stocks like the Dow, the NASDAQ Composite includes several thousand stocks. It is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies. (Since both U.S. and non-U.S. companies are listed on the NASDAQ stock market, the index is not an exclusively U.S. index.)
There are other averages as well. For example, the S&P 500 is the average value of 500 different large companies and the Russel 2000 tracks the average of 2,000 smaller companies.
Websites for Additional Information:
Stock Basics
http://www.investopedia.com/university/stocks/
http://money.howstuffworks.com/personal-finance/financial-planning/stock.htm
Definitions of Terms
www.businessdictionary.com
www.investorwords.com
Exchanges
www.nyse.com
www.nasdaq.com
Dow Jones
http://www.djaverages.com/
http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average#Companies_included_in_the_DJIA
http://www.djindexes.com/
http://www.djindexes.com/DJIA110/learning-center/ (History of the Dow)
NASDAQ Composite Index
http://dynamic.nasdaq.com/dynamic/composite_0.stm
Activity:
Based on the information above, decide if you would like to follow the DOW or the NASDAQ reports. For two weeks, record the daily average for your choice. You can find this information in the Buffalo News or online at various websites, including www.nasdaq.com , www.dowjones.com , or www.money.msn.com . You can record your information in the table below, be sure to label the dates from which you obtained your information.
Day 1 / Day 2 / Day 3 / Day 4 / Day 5 / Day 6 / Day 7Day 8 / Day 9 / Day 10 / Day 11 / Day 12 / Day 13 / Day 14
a.) Compute the Mean from your collected data ______
b.) Compute the Median from your collected data ______
c.) Compute the Mode from your collected data ______
d.) What is the Range of your collected data ______
e.) Record your data in a line graph below:
f.) Is there a pattern on your line graph? Explain.
g.) On which day did your data increase the most? Did anything significant happen in the U.S. or World News that day? Do you think this may have contributed to the increase?
h.) On which day did your data decrease the most? Did anything significant happen in the U.S. or World News that day? Do you think this may have contributed to the decrease?
i.) Based on your information and data collection, make a prediction for Day 15’s daily average. What factors helped you determine this prediction?
Extensions
1.) Students can express the data in alternative graphs, such as a Bar Graph, of Circle Graph.
2.) Students can determine and compute other statistical information, such as: minimum and maximum, percentiles and quartiles. Students can also graph a Box and Whisker Graph based on this information.
Erie Community College
Title III Grant