3. Measuring stand-alone risk using realired (historical)data Returns earned over a given time period are called realiched refums. Hestorical data on realined returns is often used to estimate fucure results, Analysts across companies use realized stock returns to estimste the risk of a stock. Consider the case of Happy Dog Soap Inc. (HDS): Nue yoars of reatized returns for HO5 are given in the following table. Remember: 1. While HOS was started 40 years ago, its common stock has been publicy traded for the past 25 years. 2. The returns on its equity are calculated as arithmetic returns. 3. The historical returns for HDS for 2014 to 2018 are: Given the preceding data, the average realized return on HDS's stock is The preceding data series represens of HOS's hist 27.56% hs. Based on this conclusion, the standard deviation of HOS s histerical returns is 22.23% 17.78% If investors expect the average realized return from 2014 to 2018 on HC o continue into the future, its coefficient of variation (CV) will be