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  3. returns earned over a given time period are called

Returns earned over a given time period are called realized returns. Historical data on realized...

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Finance

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 Happy Dog Soap Inc. (HDS):

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

1. While HDS 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 HDS for 2014 to 2018 are:
2014 2015 2016 2017 2018
Stock return 8.75% 5.95% 10.50% 14.70% 4.55%

Given the preceding data, the average realized return on HDSs stock is8.89% .

The preceding data series represents of HDSs historical returns. Based on this conclusion, the standard deviation of HDSs historical returns is .

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

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