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A stock had returns of 14.99 percent, 19.71 percent, −18.07 percent, 12.67 percent, and 27.75 percent...

A stock had returns of 14.99 percent, 19.71 percent, −18.07 percent, 12.67 percent, and 27.75 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

=(14.99+19.71-18.07+12.67+27.75)/5

=11.41%

Return (Return-Average return)^2
14.99 (14.99-11.41)^2=12.8164
19.71 (19.71-11.41)^2=68.89
-18.07 (-18.07-11.41)^2=869.0704
12.67 (12.67-11.41)^2=1.5876
27.75 (27.75-11.41)^2=266.9956
Total=1219.36%

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

=[1219.36/(5-1)]^(1/2)

=[1219.36/4]^(1/2)

=17.46%(Approx).

Variance=Standard deviation^2

=304.84%

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