How is the standard deviation of returns for individual common stocks or a stock portfolio calculated?

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How is the standard deviation of returns for individual common stocks or a stock portfolio calculated?



Answer: The spread of outcomes on different investments is commonly measured by the variance or standard deviation of the possible outcomes. The variance is the average of the squared deviations around the average outcome, and the standard deviation is the square root of the variance. The standard deviation of the returns on a market portfolio of common stocks has averaged about 17 percent per year.

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