For the dataset given below, calculate the material’s price instability index. S
ID: 3010004 • Letter: F
Question
For the dataset given below, calculate the material’s price instability index. Show all the calculations step by step.
DATA
Time, T
Mean price ($ kg^-1)
July 1995
0
803
July 1996
1
996
July 1997
2
1,060
July 1998
3
1,093
July 1999
4
1,221
July 2000
5
1,446
July 2001
6
1,350
July 2002
7
1,221
July 2003
8
1,189
July 2004
9
1,350
July 2005
10
2,507
July 2006
11
4,276
July 2007
12
2,990
July 2008
13
1,639
July 2009
14
1,929
July 2010
15
2,283
July 2011
16
3,633
July 2012
17
6,880
July 2013
18
4,179
July 2014
19
3,536
July 2015
20
4,179
DATA
Time, T
Mean price ($ kg^-1)
July 1995
0
803
July 1996
1
996
July 1997
2
1,060
July 1998
3
1,093
July 1999
4
1,221
July 2000
5
1,446
July 2001
6
1,350
July 2002
7
1,221
July 2003
8
1,189
July 2004
9
1,350
July 2005
10
2,507
July 2006
11
4,276
July 2007
12
2,990
July 2008
13
1,639
July 2009
14
1,929
July 2010
15
2,283
July 2011
16
3,633
July 2012
17
6,880
July 2013
18
4,179
July 2014
19
3,536
July 2015
20
4,179
Explanation / Answer
Most investors should be aware that standard deviation is the typical statistic used to measure volatility. Standard deviation is simply defined as the square root of the average squared deviation of the data from its mean
The stability index is the standard deviation of the price in those years.
The mean of price is $2369.524
Therefore, sqrt((803-2368.524)^2+.....(4179-2369.524)^2/20) =$ 1531.761
Hence, it is $1531.761 for our case.