The higher the standard deviation of a stock's returns,the:
A) lower the level of specific risk.
B) lower the expected rate of return.
C) higher the accuracy of predictions of the stock's return for any given year.
D) wider the dispersion of those returns over time.

Question

Quizplus · Accepted Answer

Standard deviation measures the extent of variability or dispersion of a set of data from its mean. In the case of a stock's returns, a higher standard deviation implies that the returns are more widely dispersed over time, indicating more volatility or risk. Therefore, the correct answer is (D) wider the dispersion of those returns over time. The other choices are incorrect as a higher standard deviation does not lower the level of specific risk (A), lower the expected rate of return (B), or make the predictions of the stock's return more accurate (C).

The Higher the Standard Deviation of a Stock's Returns,the