Review Of British Sky Broadcasting Commerce Essay

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Is a company that operates Sky Digital, a subscription television service in the UK and Ireland. It Belongs to Anthony Ward at Leisure Media for any recruitment bookings. It produces TV content, and owns several TV channels. It is the UK's largest pay TV provider. More than a third of the equity is owned by News Corporation, an American company chaired by Rupert Murdoch; News Corporation's precise shareholding fluctuates due to share options and buy backs and was 39.1% at May 2009.

As of 30 September 2008 it had 9,067,000 direct to home customers in the UK and Ireland. As of February 2007, it also had 3,294,000 indirect customers through the cable operator Virgin Media & through IPTV operator Tiscali TV in the UK, and a further 604,000 indirect cable customers on UPC Ireland in Ireland.

The Astra satellite network began with the launch of Astra 1A in 1989. With the launch of more Astra satellites from 1991 onward BSkyB was able to begin expanding its services (the Astra satellites were all orbitally co-located at 19.2° east so that they could be received using the same dish).Sky does not own any of the satellites it has used since withdrawing service from the Marcopolo craft; the Astra satellites are owned and operated by SES Astra (and Eurobird 1 by Eutelsat). Sky has shared its orbital position with other pay-TV systems in the past. Sky has also worked together with Tata Group bringing Tata Sky in India and substituary states.

It is listed also on the London Stock Exchange and is a constituent of the FTSE 100 Index.

BAE Systems plc:

It is a British defence, security and aerospace company headquartered in Farnborough, Hampshire, England, that has global interests, particularly in North America through its subsidiary BAE Systems Inc. BAE is the world's second-largest defence contractor and the largest in Europe. It was formed on 30 November 1999 by the £7.7 billion merger of two British companies, Marconi Electronic Systems (MES), the defence electronics and naval shipbuilding subsidiary of the General Electric Company plc (GEC), and aircraft, munitions and naval systems manufacturer British Aerospace (BAe).

It is listed also on the London Stock Exchange and is a constituent of the FTSE 100 Index.

Barclays plc:

It is a global British financial services firm operating in Europe, North America, the Middle East, Latin America, Australia, Asia and Africa. It is a holding company that is listed on the London and New York stock exchanges, and was listed on the Tokyo Stock Exchange until 2008. It is also a constituent of the FTSE 100 Index.

BG Group PLC:

It is an integrated oil and gas company which has its headquarters in Reading, Berkshire, England. The Company is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

BHP Billiton:

It is the world's largest mining company. It was created in 2001 by the merger of Australia's Broken Hill Proprietary Company (BHP) and the UK's Billiton, which had a Dutch and South African background. The result is a dual-listed company with head offices in Melbourne and London. BHP Billiton Limited, which is the majority partner in the dual-listed structure, is listed on the Australian Securities Exchange.

BHP Billiton Plc is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

BP plc (Formerly British Petroleum plc):

It is the third largest global energy company and the 4th largest company in the world. As a multinational oil company ("oil major") BP is the UK's largest corporation, with its headquarters in St James's, City of Westminster, London. The company is among the largest private sector energy corporations in the world, and one of the six "supermajors" (vertically integrated private sector oil exploration, natural gas, and petroleum product marketing companies). The Company is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

British American Tobacco Plc:

It is a leading global tobacco company. It is based in London, United Kingdom and is a constituent of the FTSE 100 Index.

The company's current form has its origins in 1902, when the United Kingdom's Imperial Tobacco Company and the American Tobacco Company of the USA agreed to form a joint venture, the British-American Tobacco Company Ltd. The parent companies agreed not to trade in each other's domestic territory and to assign trademarks, export businesses and overseas subsidiaries to the joint venture. James 'Buck' Duke became its chairman. The British American Tobacco business thus began life in countries as diverse as Canada, China, Germany, South Africa, New Zealand and Australia, but not in the United Kingdom or USA. In 1911 the American Tobacco Company sold its share of the company. Imperial Tobacco gradually reduced its shareholding, but it was not until 1980 that it divested its remaining interests in the company. In 1976 the group companies were reorganised under a new holding company, B.A.T Industries. In 1994 BAT acquired its former parent, American Tobacco Company (though reorganised after anti-trust proceedings). This brought the Lucky Strike and Pall Mall brands into BAT's portfolio. In 1999 it acquired Rothmans International, which included a share in a factory in Burma. This made it the target of criticism from human rights groups. It sold its share of the factory on 6 November 2003 after an "exceptional request" from the British government. In 2003, BAT acquired Ente Tabacchi Italiani (ETI) S.p.A, Italy's state tobacco company. The important acquisition would elevate BAT to the number two position in Italy, the second largest tobacco market in the European Union. The scale of the enlarged operations would bring significant opportunities to compete and grow ETI's local brands and BAT's international brands. In January 2007, BAT closed its remaining UK production plant in Southampton with the loss of over 600 jobs. However, the global Research and Development operation and some financial functions will continue on the site. In 2008 BAT acquired Turkey's state-owned cigarette maker Tekel. In July 2008, BAT acquired the cigarette and snus operations of the Scandinavian Tobacco Company.

British Airways plc:

It is the flag carrier airline of the United Kingdom. It is headquartered in Waterside near its main hub at London Heathrow Airport and is the largest airline in the UK based on fleet size, international flights and international destinations. Its second hub is London Gatwick Airport. British Airways has discontinued all direct overseas flights from UK airports other than Heathrow, Gatwick and London City Airport. BA's UK passengers originating at non-London airports must now connect via London or use other airlines with direct services.

British Airways is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

British Land Company PLC:

It is one of the largest property development and investment companies in the United Kingdom. It converted to a Real Estate Investment Trust when REITs were introduced in the United Kingdom in January 2007. It is headquartered in London. It is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

BT Group plc (formerly British Telecommunications plc):

It is the privatised former state telecommunications operator in the United Kingdom. It is the dominant fixed line telecommunications and broadband Internet provider in the UK, and also operates in more than 170 countries around the world. It is headquartered in the BT Centre in the City of London.

BT Group is also one of the largest communication companies in the world, with over a third of its revenue now coming from its Global Services division. A public limited company, the Group is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.

Bunzl plc:

It is a multinational distribution and outsourcing business based in London, England. Founded in 1940 as a manufacturer of cigarette filters, crêpe and tissue paper, Bunzl is today primarily a distributor of a diverse range of products including food packaging, cleaning and hygiene supplies, personal protective equipment (PPE) and carrier bags. The company's customers include contract cleaners, retailers, catering firms and food processors. Almost half of Bunzl's business is conducted in North America, with the company also operating in the British Isles, Continental Europe and to a lesser extent Australasia. Bunzl became a constituent of the FTSE 100 Index for the third time on 30 April 2008.

Burberry Group plc:

It is a British luxury fashion house, manufacturing clothing and fashion accessories. Its distinctive tartan pattern has become one of its most widely copied trademarks. The company has branded stores and franchises around the world, and also sells through concessions in third-party stores. It runs a catalogue business and has a fragrance line. HM Queen Elizabeth II and HRH The Prince of Wales have granted the company Royal Warrants. Burberry's trademark products are its fashionable handbags and exclusive fragrances. The Creative Director is Christopher Bailey. The company is listed on the London Stock Exchange and is a constituent of the FTSE 100 Index.


The objective of this paper is to analyse 10 British stocks traded on FTSE (the London Stock Exchange), namely, the B sky B, BAE Systems, Barclays, BG Group, BHP Billiton, BP, Brit Am Tobacco, British Airways, British Land, BT Group, as well as to arrive at efficient portfolios comprising these stocks. The analysis is based on weekly data on stock market returns (expressed in GBP) of the above-mentioned companies in the year 2004.10.21- 2005.11.01. Both the case of frictionless market and the case with no constraints on short selling are investigated.

The analysis relies on the classical mean-variance criteria developed by Markowitz (1952), which, despite some potential flaws, remains the cornerstone of the investment theory. The model assumes that investors are risk averse. This means that given two assets that offer the same expected return, investors will prefer the less risky one. Thus, an investor will take on increased risk only if compensated by higher expected returns. Conversely, an investor who wants higher returns must accept more risk. The exact trade-off will differ by investor based on individual risk aversion characteristics. The effect of this assumption is that only the expected return and the volatility (i.e. the mean return and the standard deviation) matter to the investor. The model is restricted to a limited range of values, namely the mean expected return and the variance. Thus the model takes the perspective of an investor with a quadratic utility function who bases his decisions on two distribution moments, namely the expected (mean) return and the variance (standard deviation) of each investment option being considered. We further assume that the returns are normally distributed.

So, the expected (mean) return on the portfolio above is the weighted average of the returns on the different stock markets:

where is the weight invested in the ith of the n stock markets.

The variance of the portfolio can be defined as:

where is the correlation between the returns of the ith and the kth stock market, and are the standard deviations of returns.

The portfolio volatility is simply:

Based on the classical mean-variance (MVC) model for the selection of portfolios of risky assets by Markowitz (1959), diversification of the investment portfolio leads to reduction of risk, measured as the standard deviation of portfolio rate of return, while keeping the same level of expected future investment returns.

Haugen Analysis

Haugen gives us some information about the portfolio distribution of the 10 companies that have been introduced before in this paper. The companies are analysed on an exact time interval which is from 2004.10.21- 2005.11.01 as it mentioned before.

The first table in Haugen shows what amount of return and standard deviation relate to different portfolios and the correlation between firms.

The first row represents the 10 companies in the exact order how in the introduction these were listed. For example sec. 2 indicates BAE Systems plc.

The second row represents the expected return in percentage which is constantly changing at different portfolios. The third row is the standard deviation in percentage at each portfolio, showing how each one deviates from the mean.

The table under standard deviation shows the correlation beetween the companies stated as „corr.".

If the correlation is 0 then there is no correlation, they are totaly independent from each other. If the correlation is under 0, it means the two companies correlate oppositely to each other, meaning that their movements are dependent, but if one goes up, the other goes down.

The weights of each companies are different at each portfolio, so we get different standard deviations and expected returns.


-> The expected return is very low 0.05% and the standard deviation is 1.97%. In the first section the lowest correlation is between the world largest mining company BHP Billiton and and British Sky Broadcasting with a 0.02239 correlation coefficient.

-> The worst case in which BAE systems Plc correlates is one of the largest telecommunications company, BT Group Plc with a 0.04437 value.

-> The highest correlation coefficient can be found till now with a 0.72136 value with the third largest global energy company British Petroleum Plc

-> The best correlation for BP Plc is the two industry dependent company, the world's largest mining company BHP Billiton and the integrated oil and gas company BG Group Plc.

-> The lowest correlation is again with BT Group Plc with a 0.02932 value.

-> The second table shows the expected returns and the porfolio's standard deviations of the 10 company without short sales. The expected return is permanently growing, not like in the first table.

-> The most efficient portfolio according to this table is the BT Group. If wee see the correlation withot short sales we observe its valeu to 99.9999, and the expected return with 0.93333 and the standard deviation with 3.03259.