A

PRICE AND RETURN DATA FOR WALMART (WMT)

AND TARGET (TGT)
Yahoo's closing price adjusts for dividends

1
2
3 Date
4
5-Jul-01
5 1-Aug-01
6 4-Sep-01
7
1-Oct-01
8 1-Nov-01
9 3-Dec-01
10 2-Jan-02
11 4-Feb-02
12 1-Mar-02
13 1-Apr-02
14 1-May-02
15 3-Jun-02
16
1-Jul-02
17 1-Aug-02
18 3-Sep-02
19 1-Oct-02
20 1-Nov-02
21 2-Dec-02
22 2-Jan-03
23 3-Feb-03
24 3-Mar-03
25 1-Apr-03
26 1-May-03
27 2-Jun-03
28
1-Jul-03
29 1-Aug-03
30 2-Sep-03
31 1-Oct-03
32 3-Nov-03
33 1-Dec-03
34 2-Jan-04
35 2-Feb-04
36 1-Mar-04
37 1-Apr-04
38 3-May-04
39 1-Jun-04
40
1-Jul-04
41 2-Aug-04
42 1-Sep-04
43 1-Oct-04
44 1-Nov-04
45 1-Dec-04
46 3-Jan-05
47 1-Feb-05

Prices
WMT
26.07
22.00
20.07
20.02
23.35
24.79
23.03
18.09
19.17
20.25
22.79
20.52
16.50
16.27
14.92
18.01
22.43
21.75
18.43
18.87
18.67
16.32
16.57
16.12
17.91
20.45
20.60
22.92
24.12
25.47
25.50
30.06
33.87
33.10
34.97
36.91
39.23
37.58
34.60
34.04
37.99
40.74
42.17
43.92

TGT
37.40
33.53
30.73
30.15
36.38
39.79
43.04
40.66
41.85
42.36
40.29
37.03
32.41
33.30
28.74
29.32
33.92
29.26
27.51
28.00
28.60
32.69
35.87
37.05
37.52
39.83
36.91
38.98
38.05
37.74
37.31
43.27
44.34
42.69
44.08
41.88
42.99
44.04
44.70
49.41
50.68
51.38
50.23
50.36

Returns
WMT
-16.97%
-9.18%
-0.25%
15.39%
5.98%
-7.36%
-24.14%
5.80%
5.48%
11.82%
-10.49%
-21.80%
-1.40%
-8.66%
18.82%
21.95%
-3.08%
-16.56%
2.36%
-1.07%
-13.45%
1.52%
-2.75%
10.53%
13.26%
0.73%
10.67%
5.10%
5.45%
0.12%
16.45%
11.93%
-2.30%
5.50%
5.40%
6.10%
-4.30%
-8.26%
-1.63%
10.98%
6.99%
3.45%
4.07%

TGT
-10.92%
-8.72%
-1.91%
18.78%
8.96%
7.85%
-5.69%
2.88%
1.21%
-5.01%
-8.44%
-13.33%
2.71%
-14.73%
2.00%
14.57%
-14.78%
-6.17%
1.77%
2.12%
13.37%
9.28%
3.24%
1.26%
5.97%
-7.61%
5.46%
-2.41%
-0.82%
-1.15%
14.82%
2.44%
-3.79%
3.20%
-5.12%
2.62%
2.41%
1.49%
10.02%
2.54%
1.37%
-2.26%
0.26%

48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73

A
1-Mar-05
1-Apr-05
2-May-05
1-Jun-05
1-Jul-05
1-Aug-05
1-Sep-05
3-Oct-05
1-Nov-05
1-Dec-05
3-Jan-06
1-Feb-06
1-Mar-06
3-Apr-06
1-May-06
1-Jun-06
3-Jul-06

B
51.25
46.92
49.25
52.04
55.69
48.24
47.04
50.93
52.19
55.31
55.63
58.46
60.23
65.46
60.84
67.51
67.65

C
49.57
45.99
53.30
54.00
58.31
53.45
51.64
55.37
53.31
54.76
54.54
54.29
51.90
52.99
48.92
48.87
49.17

E
15.43%
-8.83%
4.85%
5.51%
6.78%
-14.36%
-2.52%
7.95%
2.44%
5.81%
0.58%
4.96%
2.98%
8.33%
-7.32%
10.40%
0.21%

F
-1.58%
-7.50%
14.75%
1.30%
7.68%
-8.70%
-3.45%
6.97%
-3.79%
2.68%
-0.40%
-0.46%
-4.50%
2.08%
-7.99%
-0.10%
0.61%

Monthly mean
Monthly variance
Monthly standard deviation

WMT
1.59%
0.0093
9.63%

TGT
0.46%
0.0052
7.19%

Annual mean
Annual variance
Annual standard deviation

19.07%
0.1114
33.37%

5.47%
0.0620
24.90%

WALMART (WMT)
T)

r dividends 1
2
3
4
5 <-- =LN(C5/C4)
6 <-- =LN(C6/C5)
7 <-- =LN(C7/C6)
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47

G
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73

<-- =AVERAGE(F5:F64)
<-- =VARP(F5:F64)
<-- =STDEVP(F5:F64)
<-- =12*F67
<-- =12*F68
<-- =SQRT(F72)

UN-5B

2
Date
WMT
3
5-Jul-01
26.07
4
1-Aug-01
22.00
5
4-Sep-01
20.07
6
1-Oct-01
20.02
7
1-Nov-01
23.35
8
3-Dec-01
24.79
9
2-Jan-02
23.03
10
4-Feb-02
18.09
11
1-Mar-02
19.17
12
1-Apr-02
20.25
55
1-Nov-05
52.19
56
1-Dec-05
55.31
57
3-Jan-06
55.63
58
1-Feb-06
58.46
59
1-Mar-06
60.23
60
3-Apr-06
65.46
61
1-May-06
60.84
62
1-Jun-06
67.51
63
3-Jul-06
67.65
64
65 Average
66 Standard deviation
67
68
69
70

COMPUTING THE COVARIANCE FOR WALMART (WMT) AND TARGET (TGT)

Return
-16.97%
-9.18%
-0.25%
15.39%
5.98%
-7.36%
-24.14%
5.80%
5.48%
2.44%
5.81%
0.58%
4.96%
2.98%
8.33%
-7.32%
10.40%
0.21%

Return
minus
mean
-18.56%
-10.77%
-1.84%
13.80%
4.40%
-8.95%
-25.73%
4.21%
3.89%
0.85%
4.22%
-1.01%
3.37%
1.39%
6.74%
-8.91%
8.81%
-1.38%

TGT
37.40
33.53
30.73
30.15
36.38
39.79
43.04
40.66
41.85
42.36
53.31
54.76
54.54
54.29
51.90
52.99
48.92
48.87
49.17

1.59% <-- =AVERAGE(C4:C63)

9.63% <-- =STDEVP(D4:D63)

Return
-10.92%
-8.72%
-1.91%
18.78%
8.96%
7.85%
-5.69%
2.88%
1.21%
-3.79%
2.68%
-0.40%
-0.46%
-4.50%
2.08%
-7.99%
-0.10%
0.61%
0.46%
7.19%

Return
minus
mean
-11.38%
-9.18%
-2.36%
18.33%
8.50%
7.40%
-6.14%
2.43%
0.76%
-4.25%
2.23%
-0.86%
-0.92%
-4.96%
1.62%
-8.45%
-0.56%
0.16%

Product
<-- =G4-$G$65

0.0211 <-- =D4*H4

0.0099
0.0004
0.0253
0.0037
-0.0066
0.0158
0.0010
0.0003
-0.0004
0.0009
0.0001
-0.0003
-0.0007
0.0011
0.0075
-0.0005
0.0000

Covariance

0.0038 <-- =AVERAGE(J4:J63)

0.0038 <-- =COVAR(C4:C63,G4:G63)

Correlation

0.5484 <-- =J65/(C66*G66)

0.5484 <-- =J65/(STDEVP(C4:C63)*STDEVP(G4:G63))
0.5484 <-- =CORREL(C4:C63,G4:G63)

UN-5B

COMPUTING THE COVARIANCE FOR WALMART (WMT) AND TARGET (TGT)

1

all percentages expressed as whole numbers: The Covariance grows by a factor of 10,000, but the correlation is unchanged
Return
minus
mean

2
Date
WMT
Return
TGT
Return
3
5-Jul-01
26.07
37.40
4
1-Aug-01
22.00
-16.97
-18.56
33.53
-10.92
5
4-Sep-01
20.07
-9.18
-10.77
30.73
-8.72
6
1-Oct-01
20.02
-0.25
-1.84
30.15
-1.91
7
1-Nov-01
23.35
15.39
13.80
36.38
18.78
8
3-Dec-01
24.79
5.98
4.40
39.79
8.96
9
2-Jan-02
23.03
-7.36
-8.95
43.04
7.85
10
4-Feb-02
18.09
-24.14
-25.73
40.66
-5.69
11
1-Mar-02
19.17
5.80
4.21
41.85
2.88
12
1-Apr-02
20.25
5.48
3.89
42.36
1.21
55
1-Nov-05
52.19
2.44
0.85
53.31
-3.79
56
1-Dec-05
55.31
5.81
4.22
54.76
2.68
57
3-Jan-06
55.63
0.58
-1.01
54.54
-0.40
58
1-Feb-06
58.46
4.96
3.37
54.29
-0.46
59
1-Mar-06
60.23
2.98
1.39
51.90
-4.50
60
3-Apr-06
65.46
8.33
6.74
52.99
2.08
61
1-May-06
60.84
-7.32
-8.91
48.92
-7.99
62
1-Jun-06
67.51
10.40
8.81
48.87
-0.10
63
3-Jul-06
67.65
0.21
-1.38
49.17
0.61
64
65 Average
1.59 <-- =AVERAGE(C4:C63)
0.46
66 Standard deviation
9.63 <-- =STDEVP(D4:D63)
7.19
67
68
69
=LN(B63/B62)*100
70

Return
minus
mean
-11.38
-9.18
-2.36
18.33
8.50
7.40
-6.14
2.43
0.76
-4.25
2.23
-0.86
-0.92
-4.96
1.62
-8.45
-0.56
0.16

Product
<-- =G4-$G$65

Covariance

Correlation

211.24 <-- =D4*H4

98.84
4.34
252.87
37.37
-66.22
158.12
10.22
2.94
-3.63
9.39
0.87
-3.09
-6.91
10.93
75.26
-4.92
-0.22
37.9731 <-- =AVERAGE(J4:J63)
37.9731 <-- =COVAR(C4:C63,G4:G63)
0.5484 <-- =J65/(C66*G66)
0.5484 <-- =J65/(STDEVP(C4:C63)*STDEVP(G4:G63))
0.5484 <-- =CORREL(C4:C63,G4:G63)

Graphing Walmart returns (x-axis) and Target Returns (y-axis)

The R2 is the Correlation2

Target

18%

y = 0.4091x - 0.0019
R = 0.3008

13%

8%

3%
Walmart
-25%

-20%

-15%

-10%

-5%

0%
-2%

-7%

-12%

5%

10%

15%

A
1
2 Proportion of WMT
3 Proportion of TGT
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49

1-Aug-01
4-Sep-01
1-Oct-01
1-Nov-01
3-Dec-01
2-Jan-02
4-Feb-02
1-Mar-02
1-Apr-02
1-May-02
3-Jun-02
1-Jul-02
1-Aug-02
3-Sep-02
1-Oct-02
1-Nov-02
2-Dec-02
2-Jan-03
3-Feb-03
3-Mar-03
1-Apr-03
1-May-03
2-Jun-03
1-Jul-03
1-Aug-03
2-Sep-03
1-Oct-03
3-Nov-03
1-Dec-03
2-Jan-04
2-Feb-04
1-Mar-04
1-Apr-04
3-May-04
1-Jun-04
1-Jul-04
2-Aug-04
1-Sep-04
1-Oct-04
1-Nov-04
1-Dec-04
3-Jan-05
1-Feb-05
1-Mar-05

CALCULATING THE MEAN AND STANDARD DEVIATION O

0.5
0.5 <-- =1-B2
WMT
return
-16.97%
-9.18%
-0.25%
15.39%
5.98%
-7.36%
-24.14%
5.80%
5.48%
11.82%
-10.49%
-21.80%
-1.40%
-8.66%
18.82%
21.95%
-3.08%
-16.56%
2.36%
-1.07%
-13.45%
1.52%
-2.75%
10.53%
13.26%
0.73%
10.67%
5.10%
5.45%
0.12%
16.45%
11.93%
-2.30%
5.50%
5.40%
6.10%
-4.30%
-8.26%
-1.63%
10.98%
6.99%
3.45%
4.07%
15.43%

TGT
Portfolio
return
return
-10.92% -13.95% <-- =$B$2*B6+$B$3*C6
-8.72%
-8.95% <-- =$B$2*B7+$B$3*C7
-1.91%
-1.08%
18.78%
17.08%
8.96%
7.47%
7.85%
0.24%
-5.69% -14.92%
2.88%
4.34%
1.21%
3.35%
-5.01%
3.40%
-8.44%
-9.46%
-13.33% -17.57%
2.71%
0.65%
-14.73% -11.69%
2.00%
10.41%
14.57%
18.26%
-14.78%
-8.93%
-6.17% -11.37%
1.77%
2.06%
2.12%
0.53%
13.37%
-0.04%
9.28%
5.40%
3.24%
0.24%
1.26%
5.90%
5.97%
9.62%
-7.61%
-3.44%
5.46%
8.06%
-2.41%
1.34%
-0.82%
2.31%
-1.15%
-0.51%
14.82%
15.64%
2.44%
7.19%
-3.79%
-3.05%
3.20%
4.35%
-5.12%
0.14%
2.62%
4.36%
2.41%
-0.94%
1.49%
-3.39%
10.02%
4.19%
2.54%
6.76%
1.37%
4.18%
-2.26%
0.59%
0.26%
2.16%
-1.58%
6.93%

50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65

A
1-Apr-05
2-May-05
1-Jun-05
1-Jul-05
1-Aug-05
1-Sep-05
3-Oct-05
1-Nov-05
1-Dec-05
3-Jan-06
1-Feb-06
1-Mar-06
3-Apr-06
1-May-06
1-Jun-06
3-Jul-06

B
-8.83%
4.85%
5.51%
6.78%
-14.36%
-2.52%
7.95%
2.44%
5.81%
0.58%
4.96%
2.98%
8.33%
-7.32%
10.40%
0.21%

C
-7.50%
14.75%
1.30%
7.68%
-8.70%
-3.45%
6.97%
-3.79%
2.68%
-0.40%
-0.46%
-4.50%
2.08%
-7.99%
-0.10%
0.61%

D
-8.16%
9.80%
3.41%
7.23%
-11.53%
-2.98%
7.46%
-0.67%
4.24%
0.09%
2.25%
-0.76%
5.20%
-7.66%
5.15%
0.41%

N AND STANDARD
1
DEVIATION OF A PORTFOLIO
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49

Asset returns
Mean return
Variance
Standard deviation
Covariance

WMT
TGT
1.59%
0.46% <-- =AVERAGE(C6:C65)
0.0093
0.0052 <-- =VARP(C6:C65)
9.63%
7.19% <-- =SQRT(I8)
0.0038
<-- =COVAR(B6:B65,C6:C65)

Portfolio mean return

1.02% <-- =AVERAGE(D6:D65)
1.02% <-- =B2*H7+B3*I7
Portfolio return variance
0.0055 <-- =VARP(D6:D65)
0.0055 <-- =B2^2*H8+B3^2*I8+2*B2*B3*H10
Portfolio return standard deviation

7.42% <-- =STDEVP(D6:D65)

15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39

CALCULATING THE MEAN AND STANDARD DEVIATION OF A

Asset returns
Mean return
Variance
Standard deviation
Covariance
Proportion of WMT
Portfolio mean return
Portfolio return variance
Portfolio return standard deviation

WMT
TGT
1.59%
0.46%
0.93%
0.52%
9.63%
7.19%
0.0038
0.5 <-- In the data table below this is varied from -0.5 to 1.5
1.02% <-- =B8*B3+(1-B8)*C3
0.0055 <-- =B8^2*B4+(1-B8)^2*C4+2*B8*(1-B8)*B6
7.42% <-- =SQRT(B11)

Data table: Varying the proportion of WMT

Portfolio
standard
deviation
Proportion of WMT
7.42%
-0.5
9.08%
-0.4
8.58%
-0.3
8.13%
-0.2
7.74%
-0.1
7.42%
0
7.19%
0.1
7.04%
0.2
6.99%
0.3
7.04%
0.4
7.19%
0.5
7.42%
0.6
7.74%
0.7
8.13%
0.8
8.58%
0.9
9.08%
1
9.63%
1.1
10.22%
1.2
10.84%
1.3
11.48%
1.4
12.15%
1.5
12.84%

Porfolio
mean
return
1.02% <-- =B10, Table header
-0.11%
0.00%
Portfolio Mean and Standard
2.5%
Varying the Proportions of WM
0.12%
0.23%
0.34%
2.0%
0.46%
0.57%
0.68%
1.5%
0.80%
0.91%
1.02%
1.0%
1.14%
1.25%
1.36%
0.5%
1.48%
1.59%
1.70%
0.0%
1.82%
0%
2%
4%
1.93%
2.04%
-0.5%
2.16%
Mean return

1
2
3
4
5
6
7
8
9
10
11
12
13
14

Standard deviat

DARD DEVIATION
1
OF A PORTFOLIO
2
3
4
5
6
7
8
9
10
11
12
13
14

15
16
17
Portfolio Mean
18 and Standard Deviation
Varying the Proportions
of WMT and TGT
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
6%
8%
10%
35
36
37
38 Standard deviation
39

12%

14%

UN-5G

A
1

A FOUR-ASSET PORTFOLIO PROBLEM

Mean
returns
E(r)
6%
8%
10%
15%

Variance-covariance, S

2
3
0.10
0.01
0.03
0.05
4
0.01
0.30
0.06
-0.04
5
0.03
0.06
0.40
0.02
6
0.05
-0.04
0.02
0.50
7
8 Portfolio x
0.2
0.3
0.4
0.1
9 Portfolio y
0.2
0.1
0.1
0.6
10
11 Portfolio x and y statistics: Mean, variance, covariance, correlation
Mean, E(ry)
12 Mean, E(rx)
9.10%
12.00% <-- =MMULT(B9:E9,$F$3:$F$6)
2
Variance, sy2
13 Variance, sx
0.1216
0.2034 <-- {=MMULT(B9:E9,MMULT(A3:D6,TRANSPOSE(B9:E9)))}
14 Covariance(x,y)
0.0714 <-- {=MMULT(B8:E8,MMULT(A3:D6,TRANSPOSE(B9:E9)))}
15 Correlation, rxy
0.4540 <-- =B14/SQRT(B13*E13)
16
17 Calculating returns of combinations of Portfolio x and Portfolio y
18 Proportion of Portfolio x
0.3
19 Mean return, E(rp)
11.13% <-- =B18*B12+(1-B18)*E12
2
20 Variance of return, sp
14.06% <-- =B18^2*B13+(1-B18)^2*E13+2*B18*(1-B18)*B14

Mean return

21 Stand. dev. of return, sp

37.50% <-- =SQRT(B20)
22
23 Table of returns (uses this example and Data|Table)
Proportion
Standard
Mean
24
of x
deviation
25
37.50%
11.13% Table header: =B21,=B19
26
0.0
45.10%
12.00%
27
0.1
42.29%
11.71%
28
0.2
39.74%
11.42%
29
0.3
37.50%
11.13%
Returns of Combinations of
30
0.4
35.63%
10.84%
Portfolios x and y
13%
31
0.5
34.20%
10.55%
12%
32
0.6
33.26%
10.26%
12%
33
0.7
32.84%
9.97%
11%
34
0.8
32.99%
9.68%
11%
35
0.9
33.67%
9.39%
10%
36
1.0
34.87%
9.10%
10%
37
1.1
36.53%
8.81%
9%
38
1.2
38.60%
8.52%
9%
39
8%
40
30%
35%
40%
45%
41
Standard deviation
42
43

50%

UN-5G

2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

A FOUR-ASSET PORTFOLIO PROBLEM

Variance-covariance, S
0.10
0.01
0.01
0.30
0.03
0.06
0.05
-0.04
Portfolio X
Portfolio Y

0.2
0.2

0.03
0.06
0.40
0.02

0.05
-0.04
0.02
0.50

0.3
0.1

0.4
0.1

Mean
returns
E(r)
6%
8%
10%
15%
0.1
0.6

Portfolio X and Y statistics: Mean, variance, covariance, correlation

Mean, E(rX)

9.10%

Variance, sX2
Covariance(X,Y)
Correlation, rXY

0.1216
0.0714
0.4540

Mean, E(rY)

12.00% <-- =MMULT(B9:E9,$F$3:$F$6)

Variance, sY2 0.2034 <-- {=MMULT(B9:E9,MMULT(A3:D6,TRANSPOSE(B9:E9)))}
<-- {=MMULT(B8:E8,MMULT(A3:D6,TRANSPOSE(B9:E9)))}
<-- =B14/SQRT(B13*E13)

Calculating returns of combinations of Portfolio x and Portfolio y

Proportion of Portfolio x
Mean return, E(rp)

0.3
11.13% <-- =B18*B12+(1-B18)*E12

2
sp

Stock D

Mean return

20 Variance of return,
14.06% <-- =B18^2*B13+(1-B18)^2*E13+2*B18*(1-B18)*B14
21 Stand. dev. of return, sp
37.50% <-- =SQRT(B20)
22
23 Table of returns (uses this example and Data|Table)
Proportion
Standard
Mean
24
of X
deviation
25
37.50%
11.13% Table header: =B21,=B19
26
-0.80
72.88%
14.32%
27
-0.65
67.23%
13.89%
28
-0.50
61.72%
13.45%
29
-0.35
56.40%
13.02%
Portfolios x, y and the Four Stocks
30
-0.20
51.33%
12.58%
31
-0.05
46.59%
12.15%
15%
32
0.10
42.29%
11.71%
33
0.25
38.57%
11.28%
34
0.40
35.63%
10.84%
35
0.55
33.66%
10.41%
13%
36
0.70
32.84%
9.97%
37
0.85
33.26%
9.54%
38
1.00
34.87%
9.10%
11%
39
1.15
37.52%
8.67%
40
1.30
41.00%
8.23%
Stock C
41
1.45
45.13%
7.80%
42
1.60
49.74%
7.36%
9%
43
1.75
54.72%
6.93%
44
1.90
59.96%
6.49%
Stock B
45
Stock A
31.62%
6.00%
46
Stock B
54.77%
8.00%
7%
47
Stock C
63.25%
10.00%
48
Stock D
70.71%
15.00%
Stock A
49
50
5%
51
30%
35%
40%
45%
50%
55%
60%
65%
70%
52
Standard deviation
53
54

75%

80%

GENERAL MOTORS (GM) STOCK

ADJUSTING FOR DIVIDENDS

1
Year

Share
Discretely
Continuously
Dividend
price at
compounded compounded
per share
end year
return
return
33.00
=(B4+C4)/B3-1
30.69
2.50
0.57%
0.57%
41.75
2.50
44.20%
36.60%
42.25
3.00
8.38%
8.05% <-- =LN((C4+B4)/B3)
34.38
3.00
-11.54%
-12.26%
28.88
1.60
-11.35%
-12.04%
32.25
1.40
16.54%
15.30%
54.88
0.80
72.64%
54.60%
42.13
0.80
-21.78%
-24.56%
52.88
1.10
28.13%
24.79%
55.75
1.60
8.46%
8.12%

2
3
1986
4
1987
5
1988
6
1989
7
1990
8
1991
9
1992
10
1993
11
1994
12
1995
13
1996
14
15 Arithmetic annual return
16 Standard deviation of returns

13.43%
27.15%

9.92% <-- =AVERAGE(E4:E13)

22.84% <-- =STDEVP(E4:E13)

A
1

GENERAL MOTORS STOCK (GM)

Year-end
DiscretelyContinuouslystock
Dividend compounded compounded
price
per share
return
return
33.00
30.69
2.50
0.568%
0.567% <-- =LN((C4+B4)/B3)
41.75
2.50
44.196%
36.600%
42.25
3.00
8.383%
8.050%
34.38
3.00
-11.538%
-12.260%
28.88
1.60
-11.345%
-12.042%
32.25
1.40
16.537%
15.304%
54.88
0.80
72.636%
54.601%
42.13
0.80
-21.777%
-24.560%
52.88
1.10
28.131%
24.788%
55.75
1.60
8.463%
8.124%

Year
2
3
1986
4
1987
5
1988
6
1989
7
1990
8
1991
9
1992
10
1993
11
1994
12
1995
13
1996
14
15 Arithmetic annual return
13.425%
9.92% <-- =AVERAGE(E4:E13)
16 Standard deviation of returns
27.148%
22.838% <-- =STDEVP(E4:E13)
17
=(B13+C13)/B12-1
18
19
20
21
22
23
The column "effective shares held" assumes that dividends are reinvested
24
in shares at the end of year price. Thus, in 1987, the dividend of $2.50
25
is invested in shares costing 30.69, so that the holder of 1 share at the
26
end of 1986 could buy another 2.50/30.69 = 0.081
27
shares. At the end of 1987, the owner of 1.08 shares at the end
28
of 1986 would have received a dividend of 1.08*2.50 = 2.70
29
This dividend would be reinvested in shares, 2.7/41.75 = 0.06467
30
so that the owner of 1.08 shares at the end of 1986 would now own
31
#REF! shares.
32
33
The "compound geometric return" is defined as:
34
[Value of ending investment/Value of beginning investment]^(1/#years) -1

G
Year
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996

H
1

GM: REINVESTING THE DIVIDENDS IN SHARES

Effective
Share
Total
Number
Value of
shares held at
Dividend
price at
dividends of shares at shares at
beginning of
per share
end year
received
end of year end of year
year
33.00
33.000
=H5+K5/I5
1.00
30.69
2.500
2.500
1.081
33.188
1.08
41.75
2.500
2.704
1.146
47.855 <-- =L5*I5
1.15
42.25
3.000
3.439
1.228
51.867
1.23
34.38
3.000
3.683
1.335
45.882
1.33
28.88
1.600
2.136
1.409
40.677
1.41
32.25
1.400
1.972
1.470
47.403
1.47
54.88
0.800
1.176
1.491
81.835
1.49
42.13
0.800
1.193
1.520
64.014
1.52
52.88
1.100
1.672
1.551
82.021
1.55
55.75
1.600
2.482
1.596
88.963

2
3
4
5
6
7
8
9
10
11
12
13
14
15 Annualized continous return
16 Compound geometric return
17
18
=H5*J5
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34

9.92% <-- =LN(M13/M3)/10

10.43% <-- =(M13/M3)^(1/10)-1

UN-5B

A
1
Date
2
3
5-Jul-01
4
1-Aug-01
5
4-Sep-01
6
1-Oct-01
7
1-Nov-01
8
3-Dec-01
9
2-Jan-02
10
4-Feb-02
11
1-Mar-02
12
1-Apr-02
55
1-Nov-05
56
1-Dec-05
57
3-Jan-06
58
1-Feb-06
59
1-Mar-06
60
3-Apr-06
61
1-May-06
62
1-Jun-06
63
3-Jul-06
64
65 Monthly average
Monthly standard
66 deviation

COMPARING CONTINUOUS RETURNS TO DISCRETE RETURNS

WMT
Continuous
price
return
26.07
22.00
-16.97%
20.07
-9.18%
20.02
-0.25%
23.35
15.39%
24.79
5.98%
23.03
-7.36%
18.09
-24.14%
19.17
5.80%
20.25
5.48%
52.19
2.44%
55.31
5.81%
55.63
0.58%
58.46
4.96%
60.23
2.98%
65.46
8.33%
60.84
-7.32%
67.51
10.40%
67.65
0.21%

Discrete
return
-15.61%
-8.77%
-0.25%
16.63%
6.17%
-7.10%
-21.45%
5.97%
5.63%
2.47%
5.98%
0.58%
5.09%
3.03%
8.68%
-7.06%
10.96%
0.21%

TGT
Continuous Discrete
price
return
return
37.40
33.53
-10.92%
-10.35% <-- =F4/F3-1
30.73
-8.72%
-8.35%
30.15
-1.91%
-1.89% Cell G4 contains formula
=LN(F4/F3)
36.38
18.78%
20.66%
39.79
8.96%
9.37%
43.04
7.85%
8.17%
40.66
-5.69%
-5.53%
41.85
2.88%
2.93%
42.36
1.21%
1.22%
53.31
-3.79%
-3.72%
54.76
2.68%
2.72%
54.54
-0.40%
-0.40%
54.29
-0.46%
-0.46%
51.90
-4.50%
-4.40%
52.99
2.08%
2.10%
48.92
-7.99%
-7.68%
48.87
-0.10%
-0.10%
49.17
0.61%
0.61%

1.59%

2.07%

0.46%

0.72% <-- =AVERAGE(H4:H63)

9.61%

9.61%

7.30%

7.30% <-- =STDEVP(H4:H63)

UN-5B

A
1

MONTHLY AND ANNUAL MEANS AND VARIANCES

Date
2
3
5-Jul-01
4
1-Aug-01
5
4-Sep-01
6
1-Oct-01
7
1-Nov-01
8
3-Dec-01
9
2-Jan-02
10
4-Feb-02
11
1-Mar-02
12
1-Apr-02
55
1-Nov-05
56
1-Dec-05
57
3-Jan-06
58
1-Feb-06
59
1-Mar-06
60
3-Apr-06
61
1-May-06
62
1-Jun-06
63
3-Jul-06
64
65 Monthly average
66 Monthly variance
Monthly standard
67 deviation
68
69 Annual average
70 Annual variance
Annual standard
71 deviation

WMT
Continuous
price
return
26.07
22.00
-16.97%
20.07
-9.18%
20.02
-0.25%
23.35
15.39%
24.79
5.98%
23.03
-7.36%
18.09
-24.14%
19.17
5.80%
20.25
5.48%
52.19
2.44%
55.31
5.81%
55.63
0.58%
58.46
4.96%
60.23
2.98%
65.46
8.33%
60.84
-7.32%
67.51
10.40%
67.65
0.21%

TGT
Continuous
price
return
37.40
33.53
-10.92% <-- =LN(E4/E3)
30.73
-8.72%
30.15
-1.91%
36.38
18.78%
39.79
8.96%
43.04
7.85%
40.66
-5.69%
41.85
2.88%
42.36
1.21%
53.31
-3.79%
54.76
2.68%
54.54
-0.40%
54.29
-0.46%
51.90
-4.50%
52.99
2.08%
48.92
-7.99%
48.87
-0.10%
49.17
0.61%

1.59%
0.93%

0.46% <-- =AVERAGE(F4:F63)

0.52% <-- =VARP(F4:F63)

9.63%

7.19% <-- =STDEVP(F4:F63)

19.07%
11.14%
33.37%

5.47% <-- =12*F65

6.20% <-- =12*F66
24.90% <-- =SQRT(12)*F67