Describe the significance of applying statistical tools to measure risk. Can investors or financial managers confidently forecast performance without the application of statistical tools?
Significance of applying statistical tools to measure risk
For this discussion, we will consider the impact of variance of data sets and predictability. This module we talked about the various tools investors and managers employ to measure market risk.
Please address the following:
Describe the significance of applying statistical tools to measure risk. Can investors or financial managers confidently forecast performance without the application of statistical tools? Why or why not?
Consider for a moment how many decisions are required to operate a business whether successful or unsuccessful, large or small, private or public.
Assume now that you own your own company. Unfortunately, your company is sinking and has been in the red for the previous nine months. You are currently considering closing down and attempting to pay off the debt you owe your investors as there is no way to ethically/legally prevent the company’s ultimate demise.
You are then approached with a rather unethical opportunity that will quickly bring your company out of the red but if it came to light, would bring your entire company crashing down. However, the chances of it coming out are less than 3%. Please respond to the following ideas:
Would you save the company? Why or why not? How could this affect your company in the future?