Essay About Standard Deviation Of Returns And Standard Deviation

Bond Lecture
PORTFOLIO INVESTMENT:   TECHNICAL ANALYSIS: RISK AND RETURNReturn:[pic 1][pic 2]Share prices can rise and fall rapidly. Investors must accept that the value of their shares may fluctuate by as much as 50% or more in a year.[pic 3]Volatility is the degree of variation of a trading price series over time as measured by the standard deviation of returns.         1) Passive investing (“buy-and-hold”):            ?  RΔP(A) = RΔP(B)              2) Active investing:            ?   RΔP(A) > RΔP(B)                 ?   Risk(A) < Risk(B)         Quantitative assessment of income and risk is made by technical analysis with the folowing indicators.    Dispersion is a statistical term describing the size of the range of values expected for a particular variable. It is often interpreted as a measure of the degree of uncertainty, and thus risk, associated with a particular security or investment portfolio.. [pic 4]      (1)[pic 5] – mean (average) value of return for the whole period; r – return for each period of time; n – number of periods.Typical objective assessment of expected return and risk is based on the actual data of the previous 5 years for monthly returns values (n=60). Standard deviation is another commonly used statistic for measuring investment or portfolios volatility. The lower the standard deviation, the lower the volatility. For example, a stock has a standard deviation of 20.0% with an average return of 10%. An investor should expect the price of the investment to move 20% in either a positive or negative manner away from the average return. In theory, the stock can fluctuate in value from negative 10% to positive 30%. Stocks have the highest standard deviation, with bonds having much lower measures.[pic 6](2)Exercise#3. What is the future return and risk?PeriodReturnАВ1.20152.18203.23244.21265.17236.15197.1916Mean (average)  Return1920,4Dispersion614,53Standard Deviation2,453,81The Bell curve: Normal law of random variable distribution[pic 7]АВ1. Mean (average)  Return, %1920,42. Standard Deviation, %2,453,813. Interval of expected return, %1) Р=68,3%:2) Р=95,5%:3) Р=99,7%:(16,55 ; 21,45)(14,1 ; 23,9)(11,65 ; 26,35)(16,59 ; 24,21)(12,78 ; 28,02)(8,97 ; 31,83)