In: Finance
A stock had returns of 19.02 percent, 22.72 percent, −16.16 percent, 9.44 percent, and 28.51 percent for the past five years. What is the standard deviation of the returns?
R | D=R-12.706 | E=D^2 | |||||||
Year | Return(percentage) | Deviation from Mean | Deviation Squared | ||||||
1 | 19.02 | 6.314 | 39.8666 | ||||||
2 | 22.72 | 10.014 | 100.2802 | ||||||
3 | -16.16 | -28.866 | 833.246 | ||||||
4 | 9.44 | -3.266 | 10.66676 | ||||||
5 | 28.51 | 15.804 | 249.7664 | ||||||
SUM | 63.53 | SUM | 1233.826 | ||||||
Mean return | 12.706 | (63.53/5) | |||||||
Variance of Return =(Sum of Deviation Squared)/(5-1) | |||||||||
Variance of return | 308.45648 | (1233.826/4) | |||||||
Standard Deviation =Square Root of (Variance) | |||||||||
Standard deviation of Returns(%) | 17.5629291 | (SQRT(308.45648) | |||||||
Standard deviation of Returns | 17.56% | (Rounded to two decimals) | |||||||
Excel STDEV function can also be used over returns to find Standard Deviation | |||||||||
Standard Deviation | 17.5629291 | (Excel Command ;STDEV(19.02,22.72,-16.16,9.44,28.51)) | |||||||
Standard Deviation | 17.56% | ||||||||