(TIỂU LUẬN) RMIT international university vietnam assignment cover page question 5 a) central tendency

RMIT International University Vietnam Assignment cover page Student Name: Pham Phuc Lam Student Number: S3877459 Campus: SGS Campus Subject Name: Business Statistic Subject Code: ECON1193B Type of Assignment: Assignment – Individual Case Study Lecturer Name: Mrs Vu Thi Hong Nhung Assignment Due Date: May, 2021 Date of Submission: May, 2021 Group Number: Number of page (including that page) 15 Word Count 2843 Table of Contents PART A Question 1: .3 Question 2: .3 Question 3: .4 Question 4: .5 Question 5: .6 a) Central Tendency b) Variation c) Box-and-Whisker Plot Question 6: .8 Question 7: .9 Question & 9: 10 a) Question 8: 10 b) Question 9: 10 Question 10: 10 a) Dogecoin: 10 b) Darling: 12 PART B 13 REFERENCES 14 PART A Question 1: The measures of investment have become more diverse over time, thanks to technological advancement, particularly a new asset has had a significant attraction in the financial market cryptocurrency Cryptocurrency can be defined as a special type of currency existing in nonmaterial and digital form (Mikhaylov 2020) All transactions related to cryptocurrency are recorded and monitored by a blockchain, which is a digital and open-distributed ledger (Chuen et al 2018) This decentralization provides higher capacity, lower transaction costs, faster settlement, better transparency and security The cryptocurrency examined in this case is Dogecoin, which was created by the end of the year 2013 as a joke by Billy Markus, based on a famous meme on the social media (Chohan 2021) Its original capitalization (in 2014) was $60 million, but it has surged to $10 billion in 2021 (Chohan 2021), which means that the popularity and investment volume of Dogecoin has strikingly increased after more than seven years On the other hand, another method is to invest in a company shares, which is the most traditional measure of passive wealth building for investors (Mladjenovic 2006) A company share or stock is a unit of security and/or equity, illustrating the portion of ownership in a financial asset or company If the value of a company rises, investors of this company can receive returns, in the form of capital gains (Mladjenovic 2006), which means that share investment would have a high potential of liquidity and profit The company examined in this case is Darling Ingredient Inc., founded in 1889, is an American company about renewables and environment, headquartered in Irving, Texas (Darling Ingredients n.d.) This company focuses on developing and producing feed ingredients, food ingredients and fuel ingredients from bio-nutrients (Reuters n.d.) With more than 200 factories and offices over the world, and reaching top 57 mid-cap companies of the world, Darling has affirmed the position of prestige in their industry - renewables and environment (Darling Ingredients n.d.) Question 2: Events happened in recent days have had an effect on Dogecoin cryptocurrency and Darling company share For Dogecoin, according to Browne (2021), the price of Dogecoin has soared after Elon Musk and Mark Cuban tweeted In specific, according to Coin Metrics, the price of Dogecoin has risen by 20%, to 32 cents This is thanks to Elon Musk and Mark Cuban, the two billionaires who posted tweets which support Dogecoin However, the extraordinary rise of Dogecoin price could be a sign of warning for investors, as Dogecoin can be seen as a speculative bubble, and the bubble can burst Therefore, Dogecoin has a great performance in the cryptocurrency market, but it could be risky for investors to invest About Darling, there is a positive view in terms of Darling’s production in Q4 - 2020 (Darling Ingredients Inc 2021) Specifically, Darling’s Q4 report indicates that the processing of raw materials is strong, as well as biodiesel manufacturing achieves a record Moreover, Darling also gains benefits from high commodity prices, involving demand for the renewable diesel Furthermore, a facility-expanding project has been set to be done by the end of 2021, which contributes to a long-term development, as well as help the company to affirm their position of prestige in their industry Therefore, the performance of Darling is positive and stable, which means that its share/stock could be an ideal option for investors Question 3: Figure 1: Weekly closing prices of Dogecoin in 2020 Figure 2: Weekly closing prices of Darling in 2020 According to Figure and 2, it is clear that both the prices of DOGE and DAR experienced an approximately twofold increase throughout the time frame However, the price of DOGE seems to be erratic, while it is more stable for that of DAR About DOGE, the price of it started at nearly $0.0025 Then it rose to $0.0030 in February, before a significant decrease to slightly more than $0.0015 in March After that, the price rose to slightly higher than $0.0025, then experienced a minor decrease before strikingly recovering to approximately $0.0035 by the end of July However, it significantly dropped to about $0.0027 just before September, but then the decreasing speed became slower Ultimately, in the last two months, the price of DOGE rose dramatically to about $0.0047, despite a significant fluctuation About DAR, the price of it started at nearly $30 It was approximately stable until the mid of February, then significantly dropped to nearly 20% However, after that, if overlooking minor fluctuations, the price of DAR increased significantly and regularly to nearly $60 by the end of the year 2020 Question 4: Figure 3: Histogram of Dogecoin’s weekly returns Figure 4: Histogram of Darling’s weekly returns For both Dogecoin and Darling, the histograms of both Dogecoin and Darling appear as bell shapes, and also symmetric and concentrate around the mean This means that both of them are normally distributed Moreover, the data range of Dogecoin is wider, while it is more concentrated to the mean for Darling However, as seen from the table below, both datasets include outliers, which could make some future data calculations become less reliable Min Q1-1.5*IQR Max Q3+1.5*IQR Outliers DOGE -28.09 < -14.12 43.19 > 14.46 DAR -27.35 < -10.75 17.54 > 14.33 Table 1: Outlier test of Dogecoin and Darling Question 5: a) Central Tendency Dogecoin Darling Mean 1.98 > 1.65 Median 0.35 < 0.97 Mode #N/A #N/A Table 2: Measurement of Central Tendency for Dogecoin and Darling (%) In this case, Median is the most suitable measurement, as it represents the central value and cannot be affected by extreme values or outliers In addition, as seen in Figure, both investment types include outliers, which means that Mean is an inappropriate choice The Median of Darling (0.97) is higher than Dogecoin (0.35), which indicates that overall return of Darling is higher than that of Dogecoin, if overlooking extreme values However, for a larger picture, Measure of Variation should be considered b) Variation Dogecoin Darling Range 71.28 > 44.88 IQR 7.15 > 6.27 Sample Variance 158.06 > 51.17 Standard Deviation 12.57 > 7.15 CV 635% > 432% Table 3: Measurement of Variation for Dogecoin and Darling (%) In this case, Standard Deviation (SD) is a considered choice, as it could represent variation around the average weekly return and evaluate the fluctuation of weekly return Specifically, SD of Dogecoin (12.57) is nearly twofold that of Darling (7.15), which means that Dogecoin has significantly high or low weekly returns more frequently than Darling, or Dogecoin’s volatility level is higher than Darling in 2020 c) Box-and-Whisker Plot Figure 5: Box-and-Whisker plot of Dogecoin and Darling (%) As seen in Figure, the position of Darling is higher than Dogecoin (-1.34% - 4.93% compared to -3.4% - 3.74%), which indicates that 75% of Darling and Dogecoin’ returns are higher than -1.34% and -3.4% respectively Furthermore, Darling’s box is smaller than Dogecoin, illustrating that Darling is more frequent to get higher returns from 25%-50% than Dogecoin Moreover, the distinction between minimum return of Dogecoin and Darling is minor (28.09% and -27.35% respectively), while maximum return of Dogecoin (43.19%) is significantly higher than that of Darling (17.54%) Overall, while Dogecoin seems to be more profitable at some points, Darling is less risky for investors Question 6: To test which quarter the investment is made, and probability of a loss are statistically dependent, the conditional probability of two related variables should be investigated In specific, a probability of a loss (P(L)) is compared to the conditional probability of a loss in the first quarter (P(LQ1/L)) Loss No Loss Total Q1 6 12 Q2 13 Q3 7 14 Q4 13 Total 24 28 52 Table 4: Contingency table for Dogecoin weekly returns (weeks) For DOGE: 24 P ( L) = =0.46 52 P ( LQ )= =0.12 52 P(LQ 1) /52 L = = = =0.25 P 24 /52 24 LQ1 P(L) 24 L ≠ ) ≠ P (L)( P 24 52 LQ1 ( ) ( ) Loss No Loss Total Q1 12 Q2 13 Q3 14 Q4 13 Total 21 31 52 Table 5: Contingency table for Darling weekly returns (weeks) For DAR: 21 P ( L) = =0.40 52 P ( LQ )= =0.13 52 P ( LQ1 ) 52 L = = =0.33 P = 21 21 LQ1 P( L) 52 ( ) P( 21 L )≠ P ( L) ( ≠ ) 21 52 LQ1 In general, the probability of a loss and first-quarter investment are statistically dependent events, and there can be a similar result for the following quarters Hence, the possibility of a loss in both Dogecoin and Darling depends on which quarter the investment is made Question 7: The confidence level chosen to calculate the confidence interval for the weekly return of Dogecoin and Darling Thus, the significant level ( α ) is 0.05 (=1-0.95) Dogecoin Darling Population standard deviation (σ ) - - Sample standard deviation (S ) 12.57 7.15 1.98 1.65 52 52 51 51 2.0076 2.0076 Sample mean Sample size Degree of freedom T-critical value (X´ ) (n) (d f ) ta ,d f Table 6: Statistic summary table for Dogecoin and Darling For both investment types, n=52>30 means that the Central Limit Theorem (CLT) is applicable Hence, the sampling distribution is normally distributed Moreover, the Population standard deviation ( σ ) is unknown, then the Sample standard deviation (S) become the substitute The t distribution is used, as replacing normal distribution For Dogecoin: S 12.57 =1.98 ± 2.0076× =1.98 ± 3.5 √n √ 52 →1.52