Question

High Growth’s annual stock returns over the last 7 years are: 27%, –18%, 34%, 11%, –28%, 55%, and –15%. What is High Growth’s standard deviation of return? Enter your answer rounded to two decimal places. Do not enter % in the answer box. For example, if your answer is 0.12345 or 12.345% then enter as 12.35 in the answer box.

Answer 1

Annual stock returns over the last 7 years are: 27%, -18%, 34%, 11%, -28%, 55%, and -15%

Average Return = [0.27 + (-0.18) + 0.34 + 0.11 + (-0.28) + 0.55 + (-0.15)] / 7
Average Return = 0.66 / 7
Average Return = 0.0943 or 9.43%

Variance = [(0.27 - 0.0943)^2 + (-0.18 - 0.0943)^2 + (0.34 - 0.0943)^2 + (0.11 - 0.0943)^2 + (-0.28 - 0.0943)^2 + (0.55 - 0.0943)^2 + (-0.15 - 0.0943)^2] / 6
Variance = 0.574171 / 6
Variance = 0.095695

Standard Deviation = (0.095695)^(1/2)
Standard Deviation = 0.3093 or 30.93%

So, standard deviation of High Growth is 30.93%