63 845
Assignments Done
99,2%
Successfully Done
In August 2018

Answer to Question #49703 in Finance for abdulla sabit

Question #49703
What is a better measure of risk if assets have different expected returns:
(1) the standard deviation or
(2) the coefficient of variation? Why?
Expert's answer
Standard deviations can measure the probability that a value will fall within a certain range. For normal distributions, 68% of all values will fall within 1 standard deviation of the mean, 95% of all values will fall within 2 standard deviations, and 99.7% of all values will fall within 3 standard deviations. The coefficient of variation is a better measure of risk, quantifying the dispersion of an asset’s returns in relation to the expected return, and, thus, the relative risk of the investment. Hence, the coefficient of variation allows the comparison of different investments.

Need a fast expert's response?

Submit order

and get a quick answer at the best price

for any assignment or question with DETAILED EXPLANATIONS!

Comments

No comments. Be first!

Leave a comment

Ask Your question

Submit
Privacy policy Terms and Conditions