Below are summary data from two asset return streams. Without doing any calculations, meaning this should be a qualitative answer, if you add the four new observations into the data set, will that increase or decrease the standard deviation? Please dont just say increase or decrease, describe your answer and why you feel this way.
Part A:
Mean = 8.0%
Standard Deviation = 2.0%
# of observations = 100
Add in these 4 observations: 5.1%, 5.0%, 5.1%, and 5.2%.
Will these 4 new observations (bring total observations to 104) increase or decrease the original standard deviation?
Part B:
Mean = 8.0%
Standard Deviation = 2.0%
# of oberservations = 100
Add in these 4 observations: 12.0%, 4.0%, 12.0%, and 4.0%
Will these 4 new observations (bring total observations to 104) increase or decrease the original standard deviation?