Question

Amy is looking into investing a portion of her recent bonus into the stock market. While researching different companies, she discovers the following standard deviations of one year of daily stock closing prices.

Garden Statues Express: Standard deviation of stock prices =$1.05
=
$
⁢
1.05
Masterful Pocketwatches: Standard deviation of stock prices =$9.83
=
$
⁢
9.83
Based on the data and assuming these trends continue, which company would give Amy a stable long-term investment?

Answer 1

To determine which company would give Amy a stable long-term investment, we need to compare the standard deviations of the stock prices for both companies. A lower standard deviation indicates that the stock price is more stable and has less variability.

From the given information, we can see that the standard deviation of stock prices for Garden Statues Express is $1.05, while the standard deviation of stock prices for Masterful Pocketwatches is $9.83. This means that Garden Statues Express has a much lower standard deviation, and thus a more stable stock price, compared to Masterful Pocketwatches.

Therefore, if Amy is looking for a stable long-term investment, she should consider investing in Garden Statues Express.