Determining mean and Standard Deviation of Returns

What is the approximate standard deviation of returns if over the past four years an investment returned 8.0%, -12.0%, -12% and 15.0%?

Solution Preview

Because you did not specify, I assume that this is the entire population of returns. If it is, see parts A, B. C. If it is only a sample, see parts A, D, and E.

The standard deviation is computed by taking the square root after dividing the total of the ...

Solution Summary

This solution takes you step by step through computing the mean and standard deviation of a set of investment returns.

State Of Economy Probability Stk A Stk B Stk C
Of State of Econ.
Boom .65 .08 .02 .33
Bust .35 .14 .24 -.06
a) What is the explained return on an equally weighted portfolio of these three stocks?
b) What is the variance of a po

Consider the use of probability analysis in estimating returnsanddetermining the standard deviation. You may use a hypothetical situation and do the calculations or just describe the steps in the process.

Calculate the expected return and standard deviation of returns for asset A are (See below.)
Possible Outcomes Probability Returns (%)
Pessimistic 0.25 5
Most likely 0.55 10
Optimistic 0.20 13

Suppose that a mutual fund has a beta equal to 0.75. Is it necessarily the case that the standard deviation of returns on the fund is less than the standard deviation of market returns? Why or why not?

Returns for the Shields Company over the last 3 years are shown below. What's the standard deviation of Shields' returns? (Hint: This is a sample, not a complete population, so the sample standard deviation formula should be used.)
Year
Return
2006
2

Two stocks with actual returns as follows are being considered by me as an investor. Assist me by calculating the standard deviationand the coefficient of variation and avise me based on a comparison of risk and return.
Stock X - Actual Returns: 6%, 12%, 8%, 10%
Stock Z - Actual Returns: 9.5%, 9.25%, 8%, 9%

Please provide step by step instructions to complete the questions asked. This is the only information given in the book.
Suppose the standard deviation of the market return is 20%
A) What is the standard deviation of returns on a well-diversified portfolio with a beta of 1.3?
B) What is the standard deviation of return

A3. (Expected return and standard deviation) An investment has four possible returns, each
with its own probability given here.
a. What is the expected return?
b. What are the variance and the standard deviation of returns?
Return −12% −2% 8% 30%
Probability 0.20 0.25 0.3 0.20

Problem #3: Stock X has a standard deviation of returns of 0.6, and Stock Y has a standard deviation of 0.4. The correlation of the two stocks is 0.5. Compute the standard deviation of a portfolio invested half in X and half in Y.
Problem #4: The expected standard deviation of market returns is 0.20.Maria Houseman has the fol