Regression Analysis for Determining the Price of Alcan Stock

Regression Analysis for Determining the Price of Alcan Stock

Regression Analysis for Determining
the Price of Alcan Stock





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Jason Scott

May 1, 2006






Introduction

In this project, we have developed a model using stepwise regression to predict the price of Alcan’s stock, based on the impact of eight independent variables on the price of Alcan’s stock.   The company’s stock is listed on the New York Stock Exchange (NYSE) under the ticker symbol AL.   Of the eight variables we will be looking at, we are most interested in the impact that the price of aluminum has on Alcan’s stock.   Alcan is the second largest producer of aluminum in the world, and may be one of the purest plays on aluminum, given that Alcan spent the mid 1990’s spinning off all operations not involved with the production of aluminum.   If any company would reflect the impact of the change in aluminum prices, it would be Alcan.   Additionally, we have a keen interest in this field as both of us are employees of a company recently spun-off from Alcan.   The eight independent variables that we chose for our analysis, and our reasons for choosing them, are detailed below.


Definition of Variables

Dependant Variable

Alcan (ALCAN) The dependent variable for our model is the monthly stock price of Alcan.   Alcan is publicly traded on the New York Stock Exchange (NYSE) under the ticker symbol AL.   The stock price is collected daily and these daily numbers are averaged together to give one monthly value.   We have collected the monthly averages for the 60 month period of January 2001-December 2005.   The stock prices were gathered from the internet site http://finance.yahoo.com.

Independent Variables

The eight independent variables that we selected for our model are listed below.   The data on each of these independent variables were collected for the same time period and the same dates as that for the dependent variable (January 2001-Decemer 2005).

Alcoa (ALCOA) is the largest aluminum company in the world, and...

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