1. Go to Google finance to find the closing price of GOOGL and AMD for the month
ID: 1168035 • Letter: 1
Question
1. Go to Google finance to find the closing price of GOOGL and AMD for the month of August (click on the Historical prices tab on the left). (a) What is the mean and sample variance for GOOGE and AMD? (Sample variance is defined as s where s is the sample variance, y- are the data points, y is the mean of the yj?5, and n is the number of data points) (b) Which stock has greater sample variance? (r) Which stock is more volatile? (Hint: use the coefficient of variation which is defined as s/y where s is the sample standard deviation) (d) Intuitively, why is the coefficient of variation rather than the sample variance a good measure of volatility?Explanation / Answer
As we see in data table below, n = 21, so (n - 1) = 20
(a)
(b)
As we see, Google has higher sample variance than AMD (529.15 > 0.03)
(c) Coefficient of variation:
(Note: samples standard deviation, s = square root of sample variance)
(i) CV, Google = s / Mean = 23 / 667.66 = 0.0344
(ii) CV, AMD = s / Mean = 0.16 / 1.88 = 0.0851
Since AMD has a higher CV than Google, AMD is more volatile.
(d) Sample variance depends on unit of measurement & so gives an absolute measure. But CV is a relative measure - a ratio of 2 values with same unit of measurement, and therefore is independent of any measurement unit.
GOOGL Closing Price Closing Price - Mean (Closing Price - Mean)^2 31-Aug-15 647.82 -19.84 393.51 28-Aug-15 659.69 -7.97 63.52 27-Aug-15 667.96 0.30 0.09 26-Aug-15 659.74 -7.92 62.73 25-Aug-15 612.47 -55.19 3045.94 24-Aug-15 618.11 -49.55 2455.20 21-Aug-15 644.03 -23.63 558.38 20-Aug-15 679.48 11.82 139.71 19-Aug-15 694.04 26.38 695.90 18-Aug-15 688.73 21.07 443.94 17-Aug-15 694.11 26.45 699.60 14-Aug-15 689.37 21.71 471.32 13-Aug-15 686.51 18.85 355.32 12-Aug-15 691.47 23.81 566.92 11-Aug-15 690.3 22.64 512.57 10-Aug-15 663.14 -4.52 20.43 07-Aug-15 664.39 -3.27 10.69 06-Aug-15 670.15 2.49 6.20 05-Aug-15 673.29 5.63 31.70 04-Aug-15 661.28 -6.38 40.70 03-Aug-15 664.72 -2.94 8.64 Mean 667.66 Sum 10583.03 Sample Variance 529.15Related Questions
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