Windsor stock has produced returns of 13.8 percent, 11.7 percent, 2.3 percent, -21.4 percent, and 8.9 percent over the past five years, respectively.What is the variance of these returns?

Question

Quizplus · Accepted Answer

The variance of a set of returns is the average of the squared differences between each return and the average return. The average return is the sum of all the returns divided by the number of returns. In this case, the average return is (13.8 + 11.7 + 2.3 - 21.4 + 8.9) / 5 = 6.56%. The variance is then the average of the squared differences between each return and 6.56%. This is calculated as [(13.8 - 6.56)^2 + (11.7 - 6.56)^2 + (2.3 - 6.56)^2 + (-21.4 - 6.56)^2 + (8.9 - 6.56)^2] / 5 = 20.574%.

Windsor Stock Has Produced Returns of 13