The variance of returns is computed by dividing the sum of the:
A) squared deviations by the number of returns minus one.
B) average returns by the number of returns minus one.
C) average returns by the number of returns plus one.
D) squared deviations by the average rate of return.
E) squared deviations by the number of returns plus onE.

Question

Quizplus · Accepted Answer

The variance of returns is calculated by taking the sum of the squared deviations from the expected return, dividing by the number of returns minus one. This equation gives an unbiased estimate of the population variance.

The Variance of Returns Is Computed by Dividing the Sum