Introduction: Both S&P 500 and Dow Johns are the stock market indexes shows the top

companies’
performances. The S&P 500 represents performances of the top 500 companies listed in the stock
exchange of United states. The Dow Johns indicates the top 30 prominent companies which are
listed in stock exchange. The following indexes are belonging to company Pepsi (PEP), the data has
been considered from the time period of 01-01-2019 to 01-01-2021. Which is a two-year period.

The above S&P500 and Dow Johns indexes derives that the price of Pepsi Company’s stock had gone
through drastic changes in the time period of March and April 2020. Until February 2020 the prices
of the Pepsi company had an increasing trend between 03-08-2019 to 03-02-2020. Stock prices were
reached until $142.00 Until 03-02-2020. But from 03-03-2020 the downfall has begun and the stock
prices reached the lowest point of $100.00. Which is the least price noted in the past few years. The
representation of the variation occurred because of the global downfall. It is understood that there
has been a major impact took place in the stock trading.

Link: https://finance.yahoo.com/quote/ES%3DF/history?p=ES%3DF

https://en.wikipedia.org/wiki/2020_stock_market_crash

The following details are from S&P500 between the time period of 01-01-2019 to 01-01-2021 of the
Pepsi company.

Below are the histograms for the logs which are observed from S&P 500.
 d.log.Close d.log.Open d.log.High d.log.Low d.log.Volume
mean -0.000345317 -0.000340871 -0.000342783 -0.000357925 0.000589881
sd 0.007064412 0.00727533 0.00450792 0.005929803 0.147954633
sd/mean -20.45775838 -21.34338276 -13.15094353 -16.56717808 250.8210161
Below are the Dow Johns indexes

d.log.Close d.log.Open d.log.High d.log.Low d.log.Volume

mean -0.000231023 -0.000226419 -0.00022845 -0.000243591 0.001151896
sd 0.007445574 0.007660776 0.005067295 0.006293263 0.155159301
sd/mean -32.22874964 -33.83449604 -22.1812307 -25.83532702 134.6990774
4.3

Using the hypothesis test framework, calculate whether the differences in volatilities (variance)
are statistically significant○1 between S&P500 and Dow-Jones, and ○2 between S&P500 and the
company. Hint: two F-test for S&P 500 and Dow-Jones, and two F-test for S&P and the company.
(excluding the test using Volume as a variable) ?

Dow John’s F-test

Are d.log.Volume variances different in the first vs second year?

0.561555089

Are variances od d.log.Close different in first year vs second year?

3.63885E-49

Are variances of d.log.Close different in first year vs next six months?

7.21158E-23

S&P 500 F-test

Are d.log.Volume variances different in the first vs second year?

0.10327679

Are variances od d.log.Close different in first year vs second year?

3.82892E-46

Are variances of d.log.Close different in first year vs next six months?

9.83668E-35

Company F-Test

Are d.log.Volume variances different in the first vs second year?

8.00E-01

Are variances od d.log.Close different in first year vs second year?

2.00E-65

Are variances of d.log.Close different in first year vs next six months?

3.90E-66

The Comparison for all the three variances is shown as below with the help of F-Test.
 Difference between First year vs Second Difference between first year vs next six Difference between First Vs second

year (d.log.close) months (d.log.close) year (Volume)

S&P 500 3.82892 9.83668 0.10327679

Dow Johns 3.63885 7.21158 0.561555089

Pepsi Company 2.0 3.9 8.0

Based on the above data observation the comparison between the S&P 500 and Dow johns there
hasn’t been a huge difference in the first and second years on the whole but the very first six months
of the second year there has been changes took place, as the global downfall hits at the end of the
first year and at the begging of the second year the variances are showing that the first six months
were the prices of the stock has come down and the market crashes took place.

The market and the company performances in the taken years 2019 to 2021 had an effect because
of the Pandemic, heightened and geopolitical tensions also on the other hand China- Unites states
trade war. As both S&P500 and Dow-Jones indexes include the high trading company stocks, the
Pepsi is an individual company. Comparison of the changes took place in this year resulted in
showing that that company had a downfall in stock prices in the market, S&P500 and Dow-Jones
indexes were also had the low time. Later within a period of six months market was back to the
significant trend.