According to the mean-variance criterion, which of the statements below is correct? $\begin{array}{llr}
&& \text { Standard } \
\text { Investment } & \mathrm{E}(\mathrm{r}) & \text { Deviation } \
\text { A } & 10 \% & 5 \% \
\text { B } & 21 \% & 11 \% \
\text { C } & 18 \% & 23 \% \
\text { D } & 24 \% & 16 \% \
\hline
\end{array}$

Question

Quizplus · Accepted Answer

According to the mean-variance criterion, we want to maximize our return (E(r)) while minimizing our risk or deviation. Investment B has the highest expected return (21%) and a deviation of 11%, which is lower than investment C's deviation of 23%. Therefore, investment B dominates investment C. Investment A has a lower expected return and a higher deviation than investment B, so investment B also dominates investment A. Investment D has a higher expected return than investment B (24% vs 21%) but its deviation is also higher (16% vs 11%), so investment B dominates investment D. Therefore, the best choice is B, which is the only investment that dominates another investment based on the mean-variance criterion.

According to the Mean-Variance Criterion, Which of the Statements Below