question archive A stock had returns of 9 percent, −6 percent, 4 percent, and 16 percent over the past four years
A stock had returns of 9 percent, −6 percent, 4 percent, and 16 percent over the past four years
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A stock had returns of 9 percent, −6 percent, 4 percent, and 16 percent over the past four years. What is the standard deviation of these returns?
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Answer:
We can find it manually or using Excel function.
Manually:
| Returns | Return - Mean | (Return - Mean)2 | ||
| 9 | 3.25 | 10.5625 | ||
| -6 | -11.75 | 138.0625 | ||
| 4 | -1.75 | 3.0625 | ||
| 16 | 10.25 | 105.0625 | ||
| Mean | 5.75 | |||
| Total | 256.75 | |||
| Variance = Total / (n-1) | 85.58 | (i.e., 256.75/3) | ||
| Standard Dev = Root of Variance | 9.25 | |||
Using Excel function of STEDV
=STDEV(9,-6,4,16) would yield the result as 9.25
