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Suppose your expectations regarding the stock market are as follows: State of the Economy HPR Probability 0.4 Boom 0.4 Normal growth Recession 0.2 E (r)
Suppose your expectations regarding the stock market are as follows: State of the Economy HPR Probability 0.4 Boom 0.4 Normal growth Recession 0.2 E (r) = P (s)r (s) Var (r) = o = s-1 P (s)[r (s) E (r)] SD (r) = o = Var (r) Required: Use above equations to compute the mean and standard deviation of the HPR on stocks. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Mean % Standard deviation % 41% 15 -19
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