Stock Returns Coursework Example

Student Name: Professor: Course: Date: Question 6 Average returns. Company A = 5.23+8.91+7.32-15.81-8.32+25.98 6 =3.885% Company B =13.51-9.35+2.44+3.12+14.81+18.36 6 =7.148% Standard deviation. Company A YEAR ANNUAL RETURN DEVIATION FROM +3.885% SQUARE DEVIATION 1 5.23 1.345 1.8090 2 8.91 5.025 25.2506 3 7.32 3.435 11.7992 4 -15.81 -19.695 387.8930 5 -8.32 -12.205 148.9620 6 25.98 22.095 488.1890 Variance = ∑ (AR-µR) ^2 N Where: AR = Annual return µR = average return N = number of years Variance = 1.8090+25.2506+11.7992+387.8930+148.9620+488.1890 6 =177.3171 Standard deviation = √Variance Standard deviation = √177.3171 = 13.3160 Company B YEAR ANNUAL RETURN DEVIATION FROM+7.148% SQUARE DEVIATION 1 13.51 6.362 40.4750 2 -9.35 -16.498 272.1840 3 2.44 -4.708 22.1653 4 3.12 -4.208 16.2248 5 14.81 7.662 58.7062 6 18.36 11.212 125.7089 Variance = ∑ (AR-µR) ^2 N Where: AR = Annual return µR = average return N = number of years Variance = 40.4750+272.1840+22.1653+16.2248+58.7062+125.7089 6 =89.2440 Standard deviation = √Variance Standard deviation = √89.2440 = 9.4469 Average return of the portfolio: YEAR Company A Company B Total returns for the portfolio 1 5.23 13.51 18.74 2 8.91 -9.35 -0.44 3 7.32 2.44 9.76 4 -15.81 3.12 -12.69 5 -8.32 14.81 6.49 6 25.98 18.36 44.34 Average return of the portfolio= 18.74-0.44+9.76-12.69+6.49+44.34 6 =11.03% Standard deviation of the portfolio: Total returns for the portfolio Deviation from +11.03% Square deviation 18.74 7.71 59.4441 -0.44 -11.47 131.5609 9.76 -1.27 1.6129 -12.69 -23.72 562.6384 6.49 -4.54 26.6116 44.34 33.31 1109.5561 Variance = ∑ (AR-µR) ^2 ...