Quantitative Methods Q118
118The annual returns of a stock portfolio since its inception on 1 January 2008 is given below:
| Year | Portfolio return |
| 2008 | 7.5% |
| 2009 | 9.0% |
| 2010 | 11.5% |
| 2011 | -5.3% |
| 2012 | 9.7% |
The portfolio’s mean absolute deviation for the five-year period is closest to:
- Option : B
- Explanation : Compute the mean: (7.5 + 9.0 + 11.5 – 5.3 + 9.7) / 5 = 6.48% and compute MAD, (|7.5 – 6.48| + |9.0 – 6.48| + |11.5 – 6.48| + | –5.3 – 6.48| + |9.7 – 6.48|) / 5 = 4.71%.Compute the mean: (7.5 + 9.0 + 11.5 – 5.3 + 9.7) / 5 = 6.48% and compute MAD, (|7.5 – 6.48| + |9.0 – 6.48| + |11.5 – 6.48| + | –5.3 – 6.48| + |9.7 – 6.48|) / 5 = 4.71%.
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