Think the normal distribution assumption makes sense

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Reference no: EM131813118

The mean return and standard deviation for US large caps between 1926 – 2010 is 11.7% and 20.4% respectively. According to Bodie, the distribution is “normal with a slight positive skew.” Monte Carlo software attempts to quantify risk by running thousands of scenarios with random inputs selected from history. Many practitioners also use the assumption of normal distribution in running the risk software. Based on what you have observed in the financial markets over the last decade do you think the “normal distribution” assumption makes sense? Include in your discussion distribution measures that apply (e.g., skew, kurtosis, etc). (short answer response, 2 paragraphs)

Reference no: EM131813118

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