Use the monthly data (September 2013 - November 2014) provided on the closing pr

Question

Use the monthly data (September 2013 - November 2014) provided on the closing prices for Gold (GLD), NASDAQ, Oil (USO) and Facebook (FB).

What is the risk as measured by the standard deviation of monthly return for NASDAQ during the sample period?

4.20%

7.90%

5.19%

2.80%

Date GLD NASDAQ USO FB Sep-13 128 3771 37 50 Oct-13 128 3920 35 50 Nov-13 121 4060 33 47 Dec-13 116 4177 35 55 Jan-14 120 4104 35 63 Feb-14 128 4308 37 68 Mar-14 124 4199 37 60 Apr-14 124 4115 36 60 May-14 120 4243 38 63 Jun-14 128 4408 39 67 Jul-14 123 4370 36 73 Aug-14 124 4580 36 75 Sep-14 116 4493 34 79 Oct-14 113 4631 31 75 Nov-14 115 4713 29 74

Explanation / Answer

Computation of Standard deviation : for NASDAQ

15-period Average of Deviation squared = 984,370 / 15-1 = 70,312

Therefore, standard deviation = square root of 70,312 = 265

that mean standard deviation =0.0265 = 2.65%

Sl. no Date Price Mean = 64,092/15 Deviation = price -mean Deviation squared 1 Sep-13 3771 4272.8 -501.8 251,803 2 Oct-13 3920 4272.8 -352.8 124,468 3 Nov-13 4060 4272.8 -212.8 45,284 4 Dec-13 4177 4272.8 -95.8 9,178 5 Jan-14 4104 4272.8 -168.8 28,493 6 Feb-14 4308 4272.8 35.2 1,239 7 Mar-14 4199 4272.8 -73.8 5,446 8 Apr-14 4115 4272.8 -157.8 24,901 9 May-14 4243 4272.8 -29.8 888 10 June-14 4408 4272.8 135.2 18,279 11 July-14 4370 4272.8 97.2 9,448 12 Aug-14 4580 4272.8 307.2 94,372 13 Sep-14 4493 4272.8 220.2 48,488 14 Oct-14 4631 4272.8 358.2 128,307 15 Nov-14 4713 4272.8 440.2 193,776 Total 64,092 984,370

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