The table below shows the daily mean closing market price in Dec 2013 for three stocks and their standard deviations. Which stock is more variable?

Oct 2013	Nov 2013	Dec 2013	Jan 2014
$76,889	$74,991	$74,002	$72,290

Mean daily closing values for Dec 2013

Standard deviation

ABC LMN XYZ 134.4 98.6 179.5

2.6 3.7 3.7

(A) ABC
(B) LMN
(C) XYZ
(D) LMN and XYZ are equally variable
(E) Cannot be determined from the information given

Solutions

Expert Solution

Correct answer is B

mean_ABC = 134.4

SD_ABC = 2.6

mean_LMN = 98.6

SD_LMN = 3.7

mean_XYZ = 179.5

SD_XYZ = 3.7

To compare the variability we need to find Coefficient of variation

CV = SD/x_bar * 100

CV_ABC = SD_ABC/mean_ABC *100 = 2.6/134.4 * 100 = 1.9345

CV_LMN = SD_LMN/mean_LMN = 3.7/98.6 * 100 = 3.7525

CV_XYZ = SD_XYZ/mean_XYZ = 3.7/179.5 * 100 = 2.0613

More the CV more the variation

LMN is the most variable stock

orchestra answered 1 year ago

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