Which is the best measure of risk for an asset held in isolation, and which is the best measure for an asset held in a diversified portfolio?
A) Standard deviation; correlation coefficient.
B) Beta; variance.
C) Coefficient of variation; beta.
D) Beta; beta.
E) Variance; correlation coefficient.

Question

Quizplus · Accepted Answer

The best measure of risk for an asset held in isolation is the coefficient of variation because it considers both the risk (standard deviation) and the expected return, providing a standardized measure of risk per unit of return. For an asset held in a diversified portfolio, beta is the best measure because it reflects the asset's sensitivity to market movements, indicating how changes in the market will likely affect the asset's returns in the context of a portfolio.

Which Is the Best Measure of Risk for an Asset