Episode Details

Finance, like many other disciplines, has latched on to the normal distribution in developing its theory and models. In this session, I test out whether that assumption holds up, first by looking annual returns over long time periods on two individual stocks - Disney and Apple, and then looking at annual returns on the S&P 500 from 1928 to 2020, concluding that it is more likely to be sustained with the latter. With daily returns from 2016-2020, returns conform less to the normal distribution. In the final section, I use the natural log of stock prices for Disney to illustrate how that pushes the distribution back towards (though not the all the way) to normality.
Slides: http://www.stern.nyu.edu/~adamodar/pdfiles/Statistics101/Slides/Session4A.pdf
Post class test: http://www.stern.nyu.edu/~adamodar/pdfiles/Statistics101/postclass/session4Atest.pdf
Post class test solution: http://www.stern.nyu.edu/~adamodar/pdfiles/Statistics101/postclass/session4Asoln.pdf
Webpage for statistics class: http://people.stern.nyu.edu/adamodar/New_Home_Page/webcaststatistics.htm
YouTube Playlist for this class: https://www.youtube.com/playlist?list=PLUkh9m2BorqmXcRzWFbzcjMd7fYErVexF

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