Assignment: Price Impacts Of News
Overview: This journal activity is private between you and the instructor. This assignment will allow you to assess the impact of news on stocks and bonds. News can affect stock and bond prices in significant ways. This is because news disseminates into the market at different speeds and with different levels of importance. As investors, you need to think about how information flows through market participants and into securities. Surprise news can jolt the market up or down, whereas gradual dissemination can result in a slow buildup or deterioration in prices/yields. Additionally, market participants sometimes build expectations beforehand, and prices react differently than people expected because the news did not meet or exceed expectations. All of these dynamics can supply important information to apply to an investor's portfolio decisions.
Prompt: Complete both of the following scenarios:
1) Choose a stock from list below:
· International Business Machines Corporation (IBM)
· The Coca-Cola Company (KO)
· Bristol-Myers Squibb Company (BMY)
· Oracle Corporation (ORCL)
· 3M Company (MMM)
· Baxter International, Inc. (BAX)
· Big Lots, Inc. (BIG)
· Netflix, Inc. (NFLX)
· Akamai Technologies, Inc. (AKAM)
· General Electric Company (GE)
Then, go to Yahoo! Finance or another website and find a news article that you believe would impact the company's stock price.
Calculate the return of the chosen stock for:
· The two weeks prior to the news
· The day of the news
· The two weeks after the news
· Explain how the actual impact of the news on the stock price aligned with your initial expectation after reading the news article.
2) Choose a significant economic report (unemployment, GDP, etc.) or Federal Reserve Open Market Committee announcement.
Then, use Yahoo! Finance to research the historical pricing of the CBOE 10 year treasury yield (symbol: ^TNX). Calculate the percentage change for:
· The 2 weeks prior to the news
· The day of the news
· The 2 weeks after the news
Explain how the actual impact of the news on the bond yield aligned with your initial expectation after reading the news article. Be sure to show your work to get full credit for these calculations.
Specifically the following critical elements must be addressed:
I. Calculate the return of the chosen stock for the two weeks prior to the news, the day of the news, and the two weeks after the news. Show your work to support your response.
II. Explain whether the news article had the impact on the stock price that you expected.
III. Calculate the percentage change of the CBOE 10 year treasury yield for the two weeks prior to the news, the day of the news, and the two weeks after the news. Show your work to support your response.
IV. Explain how the actual impact of the news on the bond yield aligned with your initial expectation after reading the news article.
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also include a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also Include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.