A stock returned 14%, -22%, 3%, and 34% over the past four years, respectively. What is the standard deviation of this stock based on the past four years?

Question

Quizplus · Accepted Answer

The standard deviation is a measure of the volatility of a stock's returns. It is calculated by taking the square root of the variance, which is the average of the squared differences between the returns and the mean return. In this case, the mean return is (14% - 22% + 3% + 34%) / 4 = 7.25%. The variance is [(14% - 7.25%)^2 + (-22% - 7.25%)^2 + (3% - 7.25%)^2 + (34% - 7.25%)^2] / 4 = 543.91%. The standard deviation is therefore sqrt(543.91%) = 23.34%.

A Stock Returned 14%, -22%, 3%, and 34% Over the Past