Question

Use the following historical stock returns for GAF, Inc. to answer questions 19 and 20: Year Annual Stock Return 2005 13% 2006 1% 2007 -6% 2008 19% 2009 39% 2010 46% 2011 6% 2012 -4% 2013 14% 2014 -6% 2015 8% 2016 0% 2017 16% 2018 22% 19. What was the average annual historical return for GAF, Inc. over the 14 year period? 20. What was the standard deviation of returns for GAF, Inc. stock over the 14 year time period? (Compute the standard deviation assuming this is a population of returns, not a sample - that is, use the procedure described in the textbook for calculating the standard deviation of a series of stock returns).

Answer 1

19. Average Return =(13%+1%+-6%+19%+39%+46%+6%-4%+14%-6%+8%+0%+16%+22%)/14=12%
Population Standard Deviation =((13%-12)^2+(1%-12)^2+(-6%-12)^2+(19%-12)^2+(39%-12)^2+(46%-12)^2+(6%-12)^2+(-4%-12)^2+(14%-12)^2+(-6%-12)^2+(8%-12)^2+(0%-12)^2+(16%-12)^2+(22%-12)^2)/14)^0.5=15.30%