The smaller the variance of variability of returns on a portfolio,the more uncertain the returns on the portfolio.

Question

Quizplus · Accepted Answer

The statement is actually incorrect. A smaller variance or lower variability of returns on a portfolio means that the returns are more certain and less uncertain. This is because a smaller variance implies that the returns of the portfolio are more consistent and closer together, which decreases the range of possible outcomes and increases the predictability of future returns. Therefore, a higher variance or greater variability of returns on a portfolio would actually result in more uncertain returns.

The Smaller the Variance of Variability of Returns on a Portfolio,the