Accounting/Finance - Standard Deviation?
Question:
Given the following data, does anyone know how to calculate the standard deviation of the two-asset portfolio (weights in parenthesis):
Stock A--- (65%) /////\\\\\\\ Stock B--(35%) //////\\\\\\\////// Market
Beta --------1.07 /////\///\\\////////////\\ 0.75 /////////////////\\\\\\\\\\ 1.0
Yield --------2.05% /////\\\\///////////\\ 9.85% ////////////////\\\\\\\ 11.35%
Std. Dev. --15.64% /////\\\\\\//////\\\ 12.63% ///////\\\\\\/\\\\\\\ 4.11%
If someone knows how to answer it on Exel, please give me ideas, steps and/or functions. I don't need to show a lot of work.
Answer:
I'll be honest. Standard deviation is a more difficult concept than the others we've covered. And unless you are writing for a specialized, professional audience, you'll probably never use the words "standard deviation" in a story. But that doesn't mean you should ignore this concept.
The x-axis (the horizontal one) is the value in question... calories consumed, dollars earned or crimes committed, for example. And the y-axis (the vertical one) is the number of datapoints for each value on the x-axis... in other words, the number of people who eat x calories, the number of households that earn x dollars, or the number of cities with x crimes committed.
Terms you'll need to know
x = one value in your set of data
avg (x) = the mean (average) of all values x in your set of data
n = the number of values x in your set of data
For each value x, subtract the overall avg (x) from x, then multiply that result by itself (otherwise known as determining the square of that value). Sum up all those squared values. Then divide that result by (n-1). Got it? Then, there's one more step... find the square root of that last number. That's the standard deviation of your set of data.
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