The NASDAQ Combined Composite Index is a measure of the aggregate value of technological stocks. During the year 2007, the index moved up and down considerably, indicating the rapid changes in e-business that took place in that year and the high uncertainty in the profitability of technology-oriented companies. Historical data of the index are available at many Web sites, including Finance.Yahoo.com.
1. Download the monthly data of the index for the calendar year 2007 and make a time plot of the data. Comment on the volatility of the index, looking at the plot. Report the standard deviation of the data.
2. Download the monthly data of the index for the calendar year 2006 and compare the data for 2006 and 2007 on a single plot. Which year has been more volatile? Calculate the standard deviations of the two sets of data. Do they confirm your answer about the relative volatility of the two years?
3. Download the monthly data of the S&P 500 index for the year 2007. Compare this index with the NASDAQ index for the same year on a single plot. Which index has been more volatile? Calculate and report the standard deviations of the two sets of data.
4. Download the monthly data of the Dow Jones Industrial Average for the year 2007. Compare this index with the NASDAQ index for the same year on a single plot. Which index has been more volatile? Calculate and report the standard deviations of the two sets of data.
5. Repeat part 1 with the monthly data for the latest 12 full months.