The measure of risk in a portfolio selection problem is called:
A)the covariance of the return
B)the variance of the return
C)the expected return
D)decreasing marginal return
E)None of the above

Question

The measure of risk in a portfolio selection problem is called:
A)the covariance of the return 
B)the variance of the return 
C)the expected return 
D)decreasing marginal return 
E)None of the above

Quizplus · Accepted Answer

The variance of the return is a measure of the variability of returns from the expected value of the portfolio. It indicates the degree to which the returns of the individual securities in the portfolio move in relation to each other. A higher variance indicates a higher level of risk and vice versa. Therefore, it is the most appropriate measure of risk in a portfolio selection problem.

The Measure of Risk in a Portfolio Selection Problem Is