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Appendix 7 Statistical Tools –Arithmetic Mean –Geometric Mean –Standard Deviation –Correlation –Regression Analysis

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You own 100 shares of IBM which is selling at $96, 200 shares of Disney which is trading at $106, and 500 shares of Iddex which is trading at $15. Calculate the arithmetic and geometric means for these stocks. Calculate the weighted average for these stocks.

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Arithmetic Mean 96 + 106 + 15=$72.33 3 Geometric Mean {96 * 106 * 15 } 1/3 = $53.44 Weighted Average (100 * 96) +(200 *106) + (500 * 15) = $47.875 800

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Example of Arithmetic vs. Geometric Year Price of Idexx 0 $ 15 1 $20 2 $17 3 $25 Calculate the percentage change in the price of Idexx each year. Calculate the Arithmetic and Geometric means.

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Variance = E ( r n - r ) 2 n - 1 Calculate the variance of Idexx’s stock price.

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Correlation R a,b = Covariance of AB (Std.Dev. A)(Std. Dev. B)

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Regression Analysis r s = a + b r m + e

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NOTATION & ASSUMPTIONS 2 Y i = 1 + 2 X 2i + 3 X 3i + U i Zero mean value of U i No serial correlation Homoscedasticity Zero covariance between U.

NOTATION & ASSUMPTIONS 2 Y i = 1 + 2 X 2i + 3 X 3i + U i Zero mean value of U i No serial correlation Homoscedasticity Zero covariance between U.

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