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Technology Stocks : Dell Technologies Inc.
DELL 133.78-0.1%Nov 14 9:30 AM EST
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To: Chuzzlewit who wrote (82216)11/24/1998 9:29:00 PM
From: BGR  Read Replies (1) of 176387
 
**OT**

CTC,

This is how I remember it:

Assuming a risk-neutral world where stock prices (S) follow geometric Brownian motion (dS = rSdt + vSdz) the compounded rate of return (R) over the next period of size T is normally distributed with mean (r-s*s/2) and standard deviation (s/T), where r is the risk free rate and v is the volatility of the stock. Hence as T increases E(R) tends towards (r-s*s/2) (note that this is less than r because of compounding) which is usually > 0. IOW, the confidence intervals for R shift upwards as T increases.

I will double check Hull once I get some time.

-Apratim.
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