Impacts of Miller’s and Soergel’s News Articles on Stock Prices and Bond Yields Essay

The Impact of Miller’s Article on Oracle‘s Acquisition of Apiary

The article discusses the acquisition of Apiary company by Oracle. Apiary, founded in 2011 and has received a modest $8.5 million, assists businesses in managing APIs, which is becoming increasingly crucial (Miller, 2017). Every business is becoming a software firm, creating platforms and offering means for clients and other parties to use their technology to create apps.

The main aim of acquiring this startup was to establish Oracle in the field of cloud computing so that it could be at the same level as other established companies like Google Cloud, Azure, Microsoft, Amazon, and IBM Cloud. The news can significantly impact bond and stock values. This is due to the fact that news spreads into the market at varying rates and with varying degrees of relevance. Oracle company is likely to receive a positive impact on its stock prices as a result of this news (Miller, 2017). The article is dated January 19, 2017.

1. Article date: January 19, 2017
2. The stock price of Oracle on January 4, 2017, was $38.74
3. Oracle’s stock price as of January 18, 2017, was $39.19
4. In the calculation of the rate of the return on stocks two weeks prior to the news date, it stood at ($39.19 – $38.74) / $38.74 = 1.16%
5. The price of the stock as of January 19, 2017, was $39.21
6. The returns generated from the stock following the news date were determined as ($39.21 – $39.19) / $39.19 = 0.05%
7. The value of Oracle’s stock on January 19, 2017, was $39.21
8. Oracle’s stock price as of February 2, 2017, was $39.98
9. The computation of returns realized from the stock following the news date was ($39.98 – $39.21) / $39.21 = 1.96%

There was no noteworthy gain for the Oracle investors on the new date. However, in the following two weeks, the investors received a return of 1.96 percent, which is a significant increase as compared to the weeks before the news date. News has a favorable influence on the price of Oracle stock (Miller, 2017). Although there is a sizable return, it is not what was expected.

The Impact of Soergel‘s Report on Chicago Board Options Exchange

The report focuses on GDP growing faster than anticipated in the first quarter of 2017. The actual growth rate is 1.4% higher than expected. Consumers increased spending in the first quarter of 2017 was mostly to blame for this (Soergel, 2017). The growth rate recorded was more than expected due to the promotion of stock sales through the news.

The report was dated June 29, 2017.

1. As of June 14, the recorded yield of the CBOE 10-year treasury was $2.14
2. The CBOE 10-year treasury yield as of June 28, 2017, was $2.22
3. Two weeks return before the news on June 28, 2017, was ($2.22 – $2.14) / 2.14 = 3.74%
4. Treasury yield price as of June 29, 2017, was $2.27
5. The total yield on treasury on the date of news was ($2.27 – $2.22) / $2.22 = 2.25%
6. As of June 29, 2017, the price of the treasury was $2.27
7. On June 13, the yield of the treasury was $2.35
8. Returns that were realized after the news date was calculated as ($2.35 – 2.27) / $2.27 = 3.52%

Given the increase in the forecast growth rate in GDP, the CBOE 10-year treasury yield has been rising, which is the expected trend. Therefore, one might infer that the news positively impacts the bonds’ yield (Soergel, 2017). However, this premium is lower than the bond returns acquired two weeks before the news. This suggests that the news has a positive impact but has not significantly changed the return.

Reference

Miller, R. (2017). Oracle boosts cloud offerings with Apiary API management tool acquisition. Web.

Soergel, A. (2017). First Quarter GDP Growth Bumped Up to 1.4 Percent. Web.