Familiar Stocks
These data give monthly returns for stocks of three familiar companies: Disney, Exxon, and McDonald's from January 1990 through December 2005.
(a) Describe and contrast histograms of the three companies. Be sure to use common axes to scale the histograms to make the comparison easier and more reliable.
(b) Find the mean, SD, and cv for each set of returns. Can these means and SDs be combined with the Empirical Rule to summarize the distributions of these returns?
(c) What does comparison of the coefficients of variation tell you about these three stocks?
(d) Typically, stocks that generate high average returns also tend to be volatile, with larger upward and downward swings in price. To get a higher average rate of return, an investor has to tolerate more volatility. Is that true for these three stocks?