Question

1) Use the following descriptive statistics. The descriptive statistics are based on daily stock price returns over the last year for two companies: eBay and Disney.

- 1 -1 1 1- 1 eBay Daily Stock Return Descriptive Statistics - - - - - - Mean 0.00011 Min -0.0673 p25 -0.0099 0.0002 0.01! Max 0.0448 Std. Dev. LILIT I II III II III ІІ А ТА Disney Daily Stock Returni Descriptive Statistics Mean 0.0011 Min -0.0368 -0.0065 0.0015 p75 0.0087 Max 0.053 Std. Dev. 0.0124 1 I III p25 p50 p50 p75 LIITTI III III II I II II T-E11 TILL lo 1 III III 1 - 1 1 1 0.015

a) Does Disney appear to be more or less risky than eBay?

b) Which company's stock performed better in the past year? Describe which measures you rely on to make this conclusion.

c) Are Disney's returns normally distributed, right-skewed, or left-skewed?

Answer 1

Solution-A

Coeffcient of variation for ebAy

=sample std devi/mean

=(0.015/0.0001)

=150

Coeffcient of variation for Disney Daily

=sample std devi/mean

=(0.0124/0.001)

=12.4

Higher coefficient of variation means more volatility than expected returns

Disney appears to be less risky than eBay as its Coeffcient of variation is low as its risk per unit return is less than that of eBay

Solution-b:

Disney Daily stock performed better as its median value is 0.0015 is high compared to eBay Daily as its median is 0.0002

c) Are Disney's returns normally distributed, right-skewed, or left-skewed?

For DIsney's returns

mean=0.001

median=0.0015

mean>median

Distribution is not normal .

It is positively skewed (right-skewed)