The webpage of Sunshine Profits focuses on gold and silver investments and offers analysis andtools for its users regarding the matter. One of the most known statistic tools, normal distribution, ispresented in the dictionary section generally and in an application to estimate stock price volatility.Normal distribution is explained in simple definition including basic knowledge about mean (alsocalled expected value), standard deviation and three sigma rule. After the definition of normaldistribution, the more interesting topic regarding our project work is the implementation of normaldistribution to estimate stock price volatility. The answer to the question if normal distribution is agood tool in estimating stock price volatility is, not so. This is because the stock market prices areusually more volatile and extreme price movements are not so seldom as the bell-shaped curvewould predict. Shocks to stock markets -like 2008 financial crisis- causes the tails of distribution tobe “fatter” than in normal distribution and thus market crashes (and rises too) cause relativelybigger changes in prices than it is normally expected.Even though standard deviation is widely used to predict stock price volatility and most ofthe time the normal distribution describes price changes correctly, it is the high-volume changes inthe markets that make stock markets more volatile and investors more vulnerable for risks. This isa good point of view to consider if you are planning to invest in a particular trade based oncalculations that suggest the risk is low assuming normal distribution of returns. However, we needto take in consideration the timeline used to predict volatility, it can be useful in short time periodsbut in a long term the results will most likely be distorted..
- Rgp 24, 2021
- 2018 m.
- 6 psl.
Ne tai, ko ieškai?
Išbandyk mūsų paiešką tarp daugiau nei 16600 rašto darbų