The recent failings of large organisations like UBSBank, see (Shotter 2014),and the increased public awareness of organisations’ attitudes towards risk have identified a gap in the literature for a study attempting to measure the effects of risk attitude on company performance indicators and whether or not thatthis has led to a change in attitudes.
The aims of this assignment are to study:
whether or not there has been a change in attitudes to risk before and after the UBS bank scandal;
whether or not there is a correlation between the risk attitude of companies and their volatility, and if so to measure this effect.
A researcher collects data from 100 CEOs of various large financial organisations in the City of London, taken from a list of the largest 100 companies (measured in terms of size of workforce) available from the Financial Times, and asks them to fill in a questionnaire assessing their attitude to risk. This questionnaire gives a score out of 30 with 1 being the most conservative and 30 being the most risky. In the data file given this variable is coded RISKATT_AFTER.
Secondary data is collected from two published articles, one in 2007 and one in 2009, measuring the risk attitude of the same organisations. This provides the researcher with another variable RISKATT_BEFORE measured on the same scale as above.
These two variables will be used to answer question 1.To answer question 2 the researcher needs to measure “volatility” in the performance of the companies. In order to do this they collect the following data coded in the variables:
MAX_SHARE The maximum share price of the company in the last 30 days
MIN_SHARE The minimum share price of the company in the last 30 days
SD_SHARE The standard deviation of the share prices of the company in the last 30 days
The main objective of this assignment is to answer the questions given above, however you will also be asked to critically evaluate the research design, and the appropriateness of the analysis.
You need to write a report of between 6 and 10 sides of A4 discussing your findings, including appropriate presentations of those findings and a discussion of what they represent. As masters students you are expected to be able to not only justify your findings using the tools you’ve been taught but also to be critical about how appropriate they were to use.
You should write your report as if you are explaining the findings of a researcher (not you) to a senior manager who has a good understanding of statistical techniques.Below are a series of questions guiding you through the analysis.
In a paragraph explain in your own words the purpose of the research being undertaken. You should discuss how the CEOs are chosen and any sources of bias in the sample.
In a second paragraph you should explain how the data was collected from the CEOs. Again you need to be critical of anywhere where you might think there has been bias or where the data collection techniques could have been improved.
Answering the first research question.
Before answering the question you should summarise both variables RISKATT_BEFORE and RISKATT_AFTER using an appropriate graphical presentation and with simple descriptive statistics (means, standard deviations etc.)
You should use an appropriate hypothesis test to determine whether there has been a change in the attitudes of these companies to risk. State clearly the null and alternative hypothesis for the test and use SPSS to find the P-value.
In a short paragraph explain what you have found above and interpret your results in terms of what you feel has happened to risk attitudes and why.
Answering the second research question
Before you answer the second question you need to calculate the range of the share prices using the formula:
SHARE_RANGE = SHARE_MAX- SHARE_MIN
To answer this question you will need to use correlation and regression with SHARE_RANGE and SD_SHARE as the dependent variables. You should choose which variablewill be the independent variable. The two analyses should include:
A scatter plot of the variables;
A correlation coefficient and your interpretation of it;
If the correlation coefficient and scatter plot indicate a correlation exists then you should do a regression analysis of the data;
Plot the residuals and include them (we will be looking at this in week 12).
You should write about the suitability of the different measures of volatility: SHARE_RANGE and SD_SHARE.
Finally you should write a paragraph describing your result and critically discuss the method the researcher used.
Write a conclusion summarising your findings to both questions.
Lastly you should write a section entitled “Limitations of the study” which highlights the various areas where you might improve the research, this means in the way the sample was chosen, how the data was collected and how the variables were calculated, and whether the findings answer the questions fully. You can also use this section to suggest ways in which you might improve the research design yourself if you had been given this problem to study.