Question

Based on the below chart, what is the total risk of this company? The average return and standard deviation for the S&P 500 are around 10% and 18% respectively for the same period. Did your company outperform or underperform the S&P 500 index? Is your company’s stock riskier than the S&P 500 index?

Actual Price or Adjusted Price 37 13.87 Total Dividend Capital Gain/Loss Dividend Yield Return 1.06 1.29 Year 2007 (13.87-37)/37--.625 1.29/37 .035 -0.59 (21.42-13.87)/13.87 2008 4/13.87-.023 0.563 2009 2010 2011 2012 21.42 29.91 33.94 43.22 62.17 60.1 42.23 55.96 50.13 0.4 0.4 0.475 0.62 0.84 0.55 1.24 1.4 1.46 (29.91-21.42)/21.42- 396 (33.94 29.91)/29.91-.135 475/29.91-.016 0.151 (43.22-33.94)/33.94- 273 (62.17-43.22)/43.22- 438 (60.10-62.17)762.17 4/21.42-.019 0.415 62/33.94-.018 0.291 84/43.22-.019 0.457 55/62.17-.009 0.024 1.24/60.10 .021 -0.276 1.40/42.23 .033 0.358 1.46/55.96-.026-0.078 Average Standard Dev 2013 2014 2015 2016 2017 033 (42.23-60.10)/60.10- 297 (55.96-42.23)/42.23- 325 (50.13-55.96)/55.96- 104 0.1267 0.365771

Answer 1

S&P average return is 10% and Stock return is 12.67%. It mean stock outperform than market. again, standard deviation is a measure of unsystematic risk. standard deviation of stock return is 36.5771% and standard deviation of market is 18%.

Since, standard deviation of stock is higher than market, so stock is more riskier than market.