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3. Suppose a stock's continuously compounded (cc) rate of return has annual mean and variance of pi and o. To estimate these quantities, we divide
3. Suppose a stock's continuously compounded (cc) rate of return has annual mean and variance of pi and o. To estimate these quantities, we divide one year into n equal periods and record the return for each period. Let Him and on be the mean and variance for the cc rate of return for each period. Specifically, assume that Him = u and on = 02. If Pin and 02 are the estimates of these, then = n x n and 2 = n
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