The profits of large, diversified banking firms do not always mirror those
of firms in other industries. Therefore, the market value of their stocks
will not necessarily move in lockstep with the stock market as a whole. The
purpose of this exercise is to see how well the "Diversified Banks"
group of banking firms has performed recently relative to a broad measure
of stock market value-the S&P 500 stock index.
a. Visit S&P's Market Insight database at mhhe.com/edumarketinsight
and find the information stored there for the GIC sub-industry "Diversified
Banks." Click on "Industry Profile."
b. Based on the "Pricing" table found there, have large bank stocks
generally outperformed the market as a whole since the beginning of the year?
Have they outperformed the market over the last three years? The past five
years? By how much have they bettered or been beaten by the market's overall
performance?
c. Based on the "Valuation" table, do larger banks appear to pay
higher-than-average dividends than other firms in the market? Quantify your
answer.
d. Given your answer to part (c) identify other information from the "Valuation"
table that might indicate whether you should expect larger banks to have faster
growth in earnings than the average firm in the market. Explain.
