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    Random walk theory and normal distribution

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    Attached is the daily closing price of the stock (xmsr).
    Decide whether the data appears to be normally distributed by:

    1. Record the daily changes in the closing stock price of each day.

    a) Make a stem and leaf display, histogram or polygon, and box and whisker plot.
    b) Evaluate the actual versus theoretical properties.
    c) Construct a normal probability plot.
    d) Discuss the results. of a,b, and c.
    Note: The random walk theory pertains to the daily changes in the closing stock price, not the daily closing stock price.
    e) Based on the conclusions in d what can you now say about your distribution of each type - the daily closing prices and daily changes in closing prices? Which if any of the data sets appear to be approximately normally distributed?

    Part 2

    Use the following:

    a) Closing price and previous closing price
    b) Daily change and previous day change

    1. To make a scatter plot of the 2 data sets
    2. Complete the regression coefficient of the 2 data sets
    3. Run a regression for both and interpret it.

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    Solution Summary

    The solution analyzes closing price data on stocks and discusses its normality as well as the relevance of the data to random walk theory.