My Research and Story
One day while discussing environmental awards in my AP Environmental class and their potential impact on stocks, I thought to myself that if this assumption is true then I could profit off of it. I researched the information rigorously trying to figure out if my hypothesis may be true. For each scientific award winner, I would find companies associated with their work and examined how those companies performed. I then found the 1 year performance of those companies from the announcement date that they won the award and compared that to the S&P 500 performance in the same time period. The data chart below helped me find that scientific prize winners displayed a worse return compared to the S&P 500 on average with a lot of the stocks dropping off a lot. Some other findings from my data are that biotech stocks-typically known for being unstable- seemed to consistently perform bad after the award announcements which may suggest that award announcements are not a positive signal for purchasing biotech stocks. Another finding based on the data was that the large companies such as google seemed to perform well when advancing science, but a company like google could have had many different factors such as good earnings that may have affected the stock price in the time period so the data would need further confirmation. In conclusion, based on my data, scientific awards tied to specific companies did not appear to be a reliable indicator for stock price.
Limitations:
- The number of companies/awards was limited
- Stock prices are affected by many different factors besides scientific awards
- Past performance does not guarantee future performance
- The research is looking at correlation, not causation
- The time period examined overlooks price swings in the year and performance after the year
It is important to take these limitations into account when researching something like this or anything else and attempt to either lessen your limitations to have accurate data or think of your findings as a possible correlation and not some definite thing. When researching anything in finance, even personal finance like which credit card to get, make sure to conduct adequate research and that your research isn’t limited by anything such as bias.
The Takeaway From My Story
Stock research and analysis can be one of the most important things that you do as it sets you up to make the right choices with how to invest your money. If you ever think that certain stocks may do better than others or that news surrounding something may make stocks do better, do the research. Actually analyzing and figuring out how things have shaped stocks performance in the past can help you invest better in the future. When looking at historical data make sure to analyze multiple time periods as well, if my findings suggested that there might be a causation then I would look at multiple different instances and different dates for profit after the award announcement. It’s important to gather enough evidence and analyze the risks before deciding to invest your money. Even overall in life, it’s important to stay curious and use that curiosity through research and see what the best options are for you in that way. Every other financial step in your life aside from picking your investments, you should research and truly find out what the best step for you moving forward is. The most important thing I learned wasn’t whether a scientific prize could predict a stock. It was that investing isn’t about trying to find patterns and immediately acting on it. It’s about questioning your hypothesis, testing it against real life evidence, and being willing to change your mind when the data doesn’t agree with you. If you have this mindset in every area of life then finding the best way to do some things becomes much easier. Knowledge is power, always strive to obtain more knowledge and you will be successful.