Risk and return procedure

Risk and return procedure - Procedure for calculating...

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Procedure for calculating expected return, variance of returns, standard deviation of returns, and coefficient of variation. Expected Return = Sum of (Actual Return × Probability of Return) Where R = Expected return, i R = Actual return i, i P = Probability of return i Variance = Sum of (Square of the deviation of actual returns from the expected return × probability of return) Where 2 r = variance of returns and other symbols retain their meaning as explained above. Standard Deviation = Variance = r = 2 1 () n ii i R R P  Coefficient of Variation = Standard deviation of return expressed as a proportion to the mean return. CV = r CV R 22 1 n r i i i R R P 1 n i R R P
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It is much expeditious to calculate the above measures by constructing a table as below. When calculating, you may elect to keep the percentages for the actual return as they are or to use decimals. However for ease of manipulation, you are encouraged to keep the percentages.
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Risk and return procedure - Procedure for calculating...

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