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:

2014

2015

2016

2017

2018

Stock return25.00%17.00%30.00%42.00%13.00%

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

The preceding data series represents____ of CCC's historical returns. Based on this conclusion, the standard deviation of CCC's historical returns is____ .

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____ .

LINE 1. 63.50%, 25.40%, 50.80%,78.74%

LINE 2. the universe, the population, a sample

LINE 3. 8.79%, 15.41%, 11.41%,10.21%

LINE 4. 0.83,0.45,0.38,0.52