Risk of Return Find the standard deviation for a security th

Risk of Return Find the standard deviation for a security that has three one-year returns of -19%, 18%, and 33% respectively.

Solution

Average return=Total return/Total time period

=(-19+18+33)/3=10.67%(Approx).

Hence standard deviation=[Total (Return-Mean)^2/(Time period-1)]^(1/2)

=[1432.6667/(3-1)]^(1/2)

=(1432.6667/2)^(1/2)

which is equal to

=26.76%(Approx).