Suppose we have the past 60 monthly returns for a stock. A monthly return is represented as a percentage. A 10% monthly return means that if at the beginning of the month its price is 100 and at the end of the month its price is 110, we say its monthly return is 10%.
The question is: what is the probability of seeing this stock’s annual return for the next 12 months greater than 10%? How do we solve this problem? The problem obviously includes “forecast” and “probability”. Please provide your ideas.