Question
Returns earned over a given time period are called realized returns . Historical data on realized returns is often used to estimate future results. Analysts
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 Falcon Freight Inc. (FF):
Five years of realized returns for FF are given in the following table. Remember:
1. | While FF 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 FF for 2014 to 2018 are: |
2014 | 2015 | 2016 | 2017 | 2018 | |
---|---|---|---|---|---|
Stock return | 11.25% | 7.65% | 13.50% | 18.90% | 5.85% |
Given the preceding data, the average realized return on FFs stock is?
The preceding data series represents of FFs historical returns. Based on this conclusion, the standard deviation of FFs historical returns is?
If investors expect the average realized return from 2014 to 2018 on FFs stock to continue into the future, its coefficient of variation (CV) will be?
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