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A stock had returns of 15.07 percent, 19.83 percent, −18.51 percent, 12.71 percent, and 28.09 percent...

A stock had returns of 15.07 percent, 19.83 percent, −18.51 percent, 12.71 percent, and 28.09 percent for the past five years. What is the variance of the returns?

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Answer #1

Average Return=Total return/Total time period

=(15.07+19.83-18.51+12.71+28.09)/5=11.438%

Return (Return-Average Return)^2
15.07 (15.07-11.438)^2=13.191424
19.83 (19.83-11.438)^2=70.425664
-18.51 (-18.51-11.438)^2=896.882704
12.71 (12.71-11.438)^2=1.617984
28.09 (28.09-11.438)^2=277.289104
Total=1259.40688%

Standard deviation=[Total (Return-Average Return)^2/(Time period-1)]^(1/2)

=[1259.40688/(5-1)]^(1/2)

=[1259.40688/4]^(1/2)

=17.74%(Approx).

Variance=Standard deviation^2

=314.85172%

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