The standard deviation of returns of: I.small capitalization stocks is higher than that of large capitalization stocks.
II) large capitalization stocks is lower than that of corporate bonds.
III)corporate bonds is higher than that of Treasury bills.
Which statement is true?

Question

Quizplus · Accepted Answer

Statement I is true because small cap stocks are generally more volatile and risky than large cap stocks, leading to a higher standard deviation of returns. Statement III is also true because corporate bonds carry more credit risk than Treasury bills, hence a higher standard deviation of returns. Statement II is not necessarily true as it depends on the specific stocks and bonds being compared. There may be some large cap stocks with higher standard deviation of returns than some corporate bonds, and vice versa.

The Standard Deviation of Returns Of: I