The coefficient of variation is a better measure of risk than the standard deviation if the expected returns of the securities being compared differ significantly.

Question

Quizplus · Accepted Answer

The coefficient of variation takes into account the standard deviation of the returns and the expected returns, making it a better measure of risk when comparing securities with different expected returns. The standard deviation alone does not consider expected returns, so it may not accurately represent the level of risk for securities with different expected returns.

The Coefficient of Variation Is a Better Measure of Risk