If the dispersion around a security's return is larger
A) the expected return is smaller
B) the standard deviation is smaller
C) the stock's price is higher
D) the security's risk is higher

Question

Quizplus · Accepted Answer

A larger dispersion around a security's return indicates that its returns are more volatile, which translates to higher risk. Therefore, option D is the best answer. The expected return may or may not be smaller, and the standard deviation is actually larger if the dispersion is larger. The stock's price is not related to the dispersion around its return.

If the Dispersion Around a Security's Return Is Larger