Financial Analysis

3972 words - 16 pages

staff | id |
Peng huang | 440592680 |
ye tian | 440360573 |
ruojia li | 440607892 |
yaxuan xu | 440606390 |
luoyi shao | 440579164 |
fuyuan liu | 440592897 |





Auction
Analysis Report
invincible 6 analysis | BURWOOD
2015.4

Abstract
This report is mainly focus on the quantitative analysis of a fine art auction held by the Charleston’s auction house. In analyzing the result from the auction, this report applies stochastic dominance and mean-variance methodology on comparing estimated price with realized price of auction items. Then this report investigates the ‘hot’ auction items and auction items failed to sell in this auction by statistical ...view middle of the document...

Sydney Art Auction that we attended was held at 11am on 6th of Apr in 2015. The main auction goods of this auction, held by Lane Cove Council at 48 Longueville Road Lane Cove, are paintings, Persian and Oriental carpets, bronze sculptures, and home content.

2. Types of auctions
Types of auction have been categorized by William Vickrey in 1961 (Econport). Based on William’s theory, five auction types—English auction, Dutch auction, Sealed first-price auction, Sealed second-price auction and Multiunit auction—will be explored here.
• According to Krishna (2002), English auction can be simply expressed as open ascending price auction, that is, the subsequent bid posted by participants must be higher than the previous bid and consequently the items are sold at the highest bid (McAfee, P. and McMillan, J. 1987). In general, the items cannot be sold if the price does not exceed the minimum reserve price that the seller set before (McAfee, P., McMillan, J. 1987). English auction is used most commonly nowadays. Often, it is used to sell goods, artworks, antiques and real estate.
•Dutch auction, the opposite side of English auction, is an open descending price auction. Starting from a high asking price, Dutch auction is driven by participants who offer low subsequent bid, pushing the price lower and lower. The auction stops when one participant accepts the price or the reserve price of seller’s offer is met (McAfee, P., McMillan, J. 1987). This type of auction is not widely used, being aimed at selling perishable goods such as flowers, tobacco and fish.
• Sealed first-price auction is also called blind auction (Game Theory) because bidders don’t know others’ bids, as all participants give their bids at the same time. Each bidder can submit only one bid, contrary to the bidders in English auction who can submit several bids.
The only difference between sealed first-price auction and sealed second-price auction is that the final price is the second highest bid rather than the highest bid (Krishna 2002).
• Contrary to the above four auctions, which identical items must be sold in different auctions, Multiunit auction may have same items sold simultaneously.

3. Record all estimated price and realized price
The auction house has provided the estimated price for each auction item as the starting low price for bidders. Also, each item has a realized price bidden by bidders. 80 data have been recorded by us during the auction, and we found that the range of estimated price (9950 with minimum price of $50 and maximum price of $10000) is larger than that of realized prices (8350 with minimum price of $150 and maximum price of $8500). Fortunately, no items failed to sell in the auction.

4. Compare estimated prices to realized prices
4.1 Stochastic dominance
•As for stochastic dominance, there are two ways to valuate—first-order stochastic dominance and second-order stochastic dominance. According to Gan (2015), stochastic dominance, a tool to...

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