Calculating Variance and Standard Deviation of Stock Returns

Sign in to continue

This lesson is free - just sign in to access it.

This lesson is a part of the course Probability Concepts

Want full access? Our premium membership gives you unlimited access to all courses, quizzes, and downloadable resources.

Previous:Expected Value of Investments Next:Conditional Expected Values

We can also calculate the variance and standard deviation of the stock returns. The variance will be calculated as the weighted sum of the square of differences between each outcome and the expected returns.

The standard deviation will be:

Remember that the units of measuring standard deviation are the same as the units of measuring stock returns, in this case percentage (%).