3. Measuring stand-alone risk using realized (historical) data

Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results.

Analysts across companies use realized stock returns to estimate the risk of a stock.

Consider the case of Celestial Crane Cosmetics Inc. (CCC):

Five years of realized returns for CCC are given in the following table. Remember:

1. While CCC was started 40 years ago, its common stock has been publicly traded for the past 25 years.
2. The returns on its equity are calculated as arithmetic returns.
3. The historical returns for CCC for 2014 to 2018 are:

Stock return

2014

6.25%

2015

4.25%

2016

7.50%

2017

2018

10.50%

3.25%

Given the preceding data, the average realized return on CCC's stock is

The preceding data series represents historical returns is

of CCC's historical returns. Based on this conclusion, the standard deviation of CCC's

If investors expect the average realized return from 2014 to 2018 on CCC's stock to continue into the future, its coefficient of variation (CV) will be

3. Measuring stand-alone risk using realized (historical) data Retums eamed over a given time period are called realized retums. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock: Consider the cast of Celestial Crane Cosmetics Inc. (CCC): Five years of realized returns for coc are given in the following rable. Rememberi: 1. While CCC was started 40 years ago, its common stock has been publicly traded for the past 25 years. 2. The returns on its equity are calculated as arithmetic returns. 3. The historient retums for CCC for 2014 to 2018 are: Given the preceding data, the average realized return on CCCs stock is The preceding data series represents of CCCs histoncal returns. Fssed on this conclusion, the standard deviation af CCCs historical returns is If investors expect the average roalized retum from 2014 to 2018 on cccs stock to contunie into the future, its coelficient of vaniation (Cv) will be