Answer the following questions.
1.What is the arithmetic average of 12%, 14%, -20% (that’s negative 20) and 10%? What is the geometric average?
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2. The S&P 500 Index had the following annual returns:
2010: 12.78 2011: 0.00 2012: 13.41 2013: 29.6 2014: 11.39
Using just these last 5 years of data, what is the expected return for the Dow Jones? B. What is the standard deviation of the returns? (Please explain each step of the formula)
3. You are considering investing in 8 companies by purchasing their stock today. Answer the following:
If markets are strong form efficient, would the expected return on your friend’s investment be greater than the overall stock market return?
What is a difference between the strong form of the efficient market hypothesis and the weak form?