Chapter 1.2, Problem 51E

(a)

To determine

To describe:the overall shape of the distribution of monthly returns.

Answer to Problem 51E

The distribution is slightly left skewed.

Explanation of Solution

Given:

  

After omitting the outliers from the distribution, the histogram for the given distribution is shown below:

The distribution is slightly left skewed of the distribution of monthly returns. The distribution has single peak in the middle (if we ignore the outliers)

(b)

To determine

To find: the approximate center of this distribution

Answer to Problem 51E

Somewhere between 0% and 2.5%

Explanation of Solution

Calculation:

From the graph we see that the midpoint (median) would fall somewhere between 0% and 2.5%, since the distribution is left skewed.

Conclusion:

(c)

To determine

To find: the smallest and largest monthly returns

Answer to Problem 51E

The largestmonthly returnsare12.5%.

The smallestmonthly returnsare -12.5%.

Explanation of Solution

The monthly returns, when omitting highest outliers is 12.5%.

The monthly returns, when omitting lowest outliers is -12.5%

(d)

To determine

To find: the percent of all months which had less than zeroreturns

Answer to Problem 51E

About 37% .

Explanation of Solution

It is given that a return less than zero means that stocks lost value in that month. The months had returns less than zero means negative returns, which are 102 out of 273 months.

Conclusion: “Therefore, about 37% of these months had negative returns.”