You would like to characterize the randomness of daily S&P 500 returns using a probability distribution and assess the possibility of assuming a normal distribution. Which of the following is correct regarding your approach? O A. The daily returns are well characterized with a normal distribution that inherits the historical mean and standard deviation of daily returns. O B. The normal distribution assumption will imply excess kurtosis but zero skewness. O C. Under your assumption, the probability of observing a daily return that is more than two standard deviations higher than the mean is 10%. O D. Events such as the 1987 stock market crash will be essentially impossible driving a discrepancy between realized data and your assumption.
You would like to characterize the randomness of daily S&P 500 returns using a probability distribution and assess the possibility of assuming a normal distribution. Which of the following is correct regarding your approach? O A. The daily returns are well characterized with a normal distribution that inherits the historical mean and standard deviation of daily returns. O B. The normal distribution assumption will imply excess kurtosis but zero skewness. O C. Under your assumption, the probability of observing a daily return that is more than two standard deviations higher than the mean is 10%. O D. Events such as the 1987 stock market crash will be essentially impossible driving a discrepancy between realized data and your assumption.
A First Course in Probability (10th Edition)
10th Edition
ISBN:9780134753119
Author:Sheldon Ross
Publisher:Sheldon Ross
Chapter1: Combinatorial Analysis
Section: Chapter Questions
Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...
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Transcribed Image Text:You would like to characterize the randomness of daily S&P 500 returns using a probability distribution and assess the
possibility of assuming a normal distribution. Which of the following is correct regarding your approach?
O A. The daily returns are well characterized with a normal distribution that inherits the historical mean and standard deviation
of daily returns.
B. The normal distribution assumption will imply excess kurtosis but zero skewness.
C. Under your assumption, the probability of observing a daily return that is more than two standard deviations higher than
the mean is 10%.
D. Events such as the 1987 stock market crash will be essentially impossible driving a discrepancy between realized data and
your assumption.
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