In-line exercise: mean return and volatility
In four years, a portfolio of common stocks realized returns of 40%, 0%, -30%, and 10%. Compute the (arithmetic) mean, variance, and standard deviation of returns. For this exercise, divide by the number of returns (not one less) to compute the variance.
Phil Dybvig
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I invite you to work on this in-line exercise. Press the small right triangle to see the solution. Even if you do not finish, I suggest working on the problem before looking at the answer. Then the answer will mean more to you because you will see where you got stuck. |