In: Finance
You have been following a stock for 3 months and the following is its past return
Year 1: 7%
Year 2: 13%
Year 3: -3%
What is the standard deviation of the stock based on the historical data? (Put the answer in decimal points instead of percentage)
Statement showing Standard deviation
Year |
Return (x) (in %) |
(x-u) | (x-u)^2 |
1 | 7 | 1.33 | 1.77 |
2 | 13 | 7.33 | 53.73 |
3 | -3 | -8.67 | 75.17 |
17 | 130.67 |
Mean = u = 17/3 = 5.67
Standard devaition = [130.67/3]^0.5
= 43.56^0.5
= 6.60
Thus ans = 0.066