Question

2. Measuring standalone risk using realized data Aa Aa E Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock. Consider the case of Celestial Crane Cosmetics Inc. (CCC): Five years of realized returns for CCC are given in the following table. Remember: 1. While CCC was started 40 years ago, its common stock has been publicly traded for the past 25 years. 2. The returns on its equity are calculated as arithmetic returns. 3. The historical returns for CCC for 2012 to 2015 are: 2012 2013 2014 2015 2016 Stock return 6.25% 4.25% 7.50% 10.50% 3.25% Given the preceding data, the average realized return on CCC's stock is of CCC's historical returns. Based on this conclusion, the The preceding data series represents standard deviation of CCC's historical returns is If investors expect the average realized return from 2012 to 2016 on CCC's stock to continue into the future, its coefficient of variation (CV) will be

Answer 1

C102 fix =B102-$B$108 А B D F 99 Data series represent "Sample" 100 Deviation from mean 101 Period Returns 1 6.25% Standard deviation Mean 0.45 2.85%/6.35% 2 Square of deviation coefficient of variation 0.0000 Coefficient of variation 0.0004 0.0001 0.0017 0.0010 0.0033 (0.00) (0.02) 0.01 0.04 (0.03) 4 5 102 103 104 3 105 106 107 Sum 108 Average return 109 110 Variance 111 Standard deviation 112 (root of variance) 4.25% 7.50% 10.50% 3.25% 31.75% 6.35% (31.75/5) 0.0008 2.85% (0.0033/(5-1))

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