Question

27. Calculating Descriptive Statistics Check Your Understanding Consider the following returns data for the market and XYZ, Inc. Year 1 Market 10.5% 15.6 -2.0 9.2 XYZ 6.4% 6.2 5.0 25.3 3 4. What was the average market return over this period? What was XYZ's average return? standard deviation is the appropriate measure of Because the data only covers four years of market and stock returns, the dispersion to use. XYZ's standard deviation of returns was The correlation coefficient between the returns on XYZ and the market is The beta of a regression line between XYZ and the market is

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

C D Year 1 2 3 Market 10.50% 15.60% -2.00% 9.20% XYZ 6.40% 6.20% 5.00% 25.30% 8.33% Average market return XYZ's average return 10.73% Sample Standard deviation is the appropriate measure of dispersion. XYZ's standard deviation 9.7363% Correlation(Market,XYZ) 0.13635 Beta of XYZ 0.1790

Cell reference -

B Year Market 0.105 0.156 -0.02 0.092 XYZ 0.064 0.062 0.05 0.253 Average market return XYZ's average return =AVERAGE(C3:C6) =AVERAGE(D3:D6) Sample Standard deviation is the appropriate measure of dispersion. XYZ's standard deviation =STDEV.S(D3:D6) Correlation Market,XYZ) =CORREL(C3:C6,D3:D6) Beta of XYZ =SLOPE(D3:06, C3:06)

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