Which of the following is true regarding the coefficient of variation (CV)?
A)All other measures being equivalent,the optimal strategy is to choose the action or option with the highest CV.
B)The CV gives an absolute measure of variability among the options.
C)The return-to-risk ratio (RTRR)is a function of the CV.
D)In choosing between the CV and the RTRR,the better strategy is to choose the CV.

Question

Quizplus · Accepted Answer

The coefficient of variation (CV) is a relative measure of variability that calculates the standard deviation as a percentage of the mean. It does not provide an absolute measure of variability, so option B is false. The optimal strategy cannot be determined solely based on the CV since it does not provide information about the expected return, so option A is false. The return-to-risk ratio (RTRR) is a measure of the expected return relative to the risk, and it is a function of the CV. Therefore, option C is true. Option D is false because the CV and the RTRR are both useful measures, and the choice between them depends on the specific situation and the decision-maker's preferences.

Which of the Following Is True Regarding the Coefficient of Variation