Suppose you observe the following monthend stock prices for

Suppose you observe the following month-end stock prices for stocks Y and Z:

                                                              Day
                                        0               1            2            3            4
Stock Y                         100           105       102         97        100
Stock Z                         100           105        150        97        100

Compute the following for each stock.

a. The mean monthly continuously compounded return

b. The annual return

c. The mean monthly standard deviation

d. The mean annual standard deviation

Solution

Day Stock X Rate of Return Stock Y Rate of Return 0 100 100 1 105 0.048790 105 0.048790 2 102 -0.028988 150 0.356675 3 97 -0.050262 97 -0.435924 4 100 0.030459 100 0.030459 Sum -0.000001 0.000000 Day Stock X xi-u (xi-u)^2 Stock Y yi-u (yi-u)^2 0 100 0.800000 0.640000 100 10.400000 108.160000 1 105 -4.200000 17.640000 105 5.400000 29.160000 2 102 -1.200000 1.440000 150 -39.600000 1568.160000 3 97 3.800000 14.440000 97 13.400000 179.560000 4 100 0.800000 0.640000 100 10.400000 108.160000 Mean 100.8 Sum= 34.800000 110.4 Sum= 1993.200000 Standard Deviation= 5.8 Standard Deviation= 332.2