Returns earned over a given time period are called realized returns. Historical

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 across companies use realized stock returns to estimate the risk of a stock Five years of realized returns for happy Dog soap Inc. (Happy Dog) are given in the following table: While Happy dog was started 40 years ago, Its common stock has been publicity traded for the past 25 years. The returns on happy Dog's equity are calculated as arithmetic returns. Give this return data the average realized return on Happy Dog soap Inc.'s stock is The proceeding data series represents Of Happy Dog's historical returns. Based on the conclusion the standard deviation of Happy Dog's historical returns is

Explanation / Answer

The arithematic average return = (16.25 +11.05 +19.5 +27.3 +8.45)/4 = 82.55/4 = 20.6375%

Hence the average realized return on Happy Dog Soap is 20.6375%

The preceding data serirs represented average relaized returns of Happy Dog's historical returns. Based on this conclusion, the stadard deviation is 7.42% (0.074197 = 0.0742 =7.42%)

The Coefficient of Variation = SD ^2 = 0.074197^2 = 0.005505

Year Returns 2009 16.25% 2010 11.05% 2011 19.50% 2012 27.30% 2013 8.45% Std. deviation 0.074197 Coefficient of Variation 0.005505

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