Question
Measuring stand-alone risk using realized (historical) data Returns earned over a given time period are called realized returns. Historical data on realized returns is often
Measuring stand-alone risk using realized (historical) data
Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock.
Consider the case of Celestial Crane Cosmetics Inc. (CCC):
Five years of realized returns for CCC are given in the following table. Remember:
1. | While CCC was started 40 years ago, its common stock has been publicly traded for the past 25 years. |
2. | The returns on its equity are calculated as arithmetic returns. |
3. | The historical returns for CCC for 2014 to 2018 are: |
2014 | 2015 | 2016 | 2017 | 2018 | |
---|---|---|---|---|---|
Stock return | 17.50% | 11.90% | 21.00% | 29.40% | 9.10% |
Given the preceding data, the average realized return on CCCs stock is ____________
The preceding data series represents__________ of CCCs historical returns. Based on this conclusion, the standard deviation of CCCs historical returns is ____________ .
If investors expect the average realized return from 2014 to 2018 on CCCs stock to continue into the future, its coefficient of variation (CV) will be ___________
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