Using the following returns, calculate the arithmetic average returns, the standard deviations, and the geometric returns for the stock A, B, and C. Assume the return of stocks are normally distributed. If Mr. Wong owns a stock C, based on the historical return data, there is only a 2.5 percent chance that the stock C will produce a return greater than _____ percent in any one year. If Mr. Wong owns a stock B, which range of returns would Mr. Wong expect to see approximately two-thirds of the time? Year A % B % C % 1 2.54 4.84 1.64 2 3.56 5.86 2.86 3 4.54 6.84 3.64 4 2.94 5.24 2.04 5 1.54 3.84 0.64 6 4.54 6.84 4.84 7 2.54 3.84 0.64 8 4.54 6.84 3.64 9 2.94 6.24 7.24
Inverse Normal Distribution
The method used for finding the corresponding z-critical value in a normal distribution using the known probability is said to be an inverse normal distribution. The inverse normal distribution is a continuous probability distribution with a family of two parameters.
Mean, Median, Mode
It is a descriptive summary of a data set. It can be defined by using some of the measures. The central tendencies do not provide information regarding individual data from the dataset. However, they give a summary of the data set. The central tendency or measure of central tendency is a central or typical value for a probability distribution.
Z-Scores
A z-score is a unit of measurement used in statistics to describe the position of a raw score in terms of its distance from the mean, measured with reference to standard deviation from the mean. Z-scores are useful in statistics because they allow comparison between two scores that belong to different normal distributions.
Using the following returns, calculate the arithmetic average returns, the standard deviations, and the geometric returns for the stock A, B, and C. Assume the return of stocks are
|
Year |
A % |
B % |
C % |
|
1 |
2.54 |
4.84 |
1.64 |
|
2 |
3.56 |
5.86 |
2.86 |
|
3 |
4.54 |
6.84 |
3.64 |
|
4 |
2.94 |
5.24 |
2.04 |
|
5 |
1.54 |
3.84 |
0.64 |
|
6 |
4.54 |
6.84 |
4.84 |
|
7 |
2.54 |
3.84 |
0.64 |
|
8 |
4.54 |
6.84 |
3.64 |
|
9 |
2.94 |
6.24 |
7.24 |
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