Determine normal distribution with mean & standard deviation
How are normal distributions with mean and standard deviation in a given period shown?
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In Modern Portfolio Theory the return on individual assets are shown by normal distributions with specific mean and standard deviation over a given period. Therefore, one asset might have an annualized expected return of 5 percent and an annualized standard deviation or volatility of 15%. The other might have an expected return of −2 percent and a volatility of 10 percent. Before Markowitz, one would only have invested in the first stock, or maybe sold the second stock short.
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