Question 13.16

1. Obtain a histogram and Normal quantile plot of the returns data. What do you conclude about the distribution of the returns?
2. In the previous chapter on control charts, limits were placed plus and minus three standard deviations around the sample mean to identify unusual observations. What are the plus and minus three standard deviation limits for the return data?
3. There are returns in the series shown in Figure 13.18. If the data were consistent with the Normal distribution, how many returns would we expect to fall outside the limits computed in part (b)? Is the actual number of returns falling outside of the limits close to this expected number?
4. Eyeballing Figure 13.18, where would you roughly place the limits so that the expected number of observations falling outside of the limits is close to the expected number found in part (c)?