The standard deviation is appropriate to compare the risk between two investments only if

Question

Quizplus · Accepted Answer

The standard deviation is a measure of the variability of returns around the expected value. Comparing the standard deviation of two investments can only provide meaningful information if the expected returns from both investments are approximately equal. If the expected returns are not equal, the investment with the higher expected return may also have a higher standard deviation, indicating higher risk. Additionally, the other options (similar life spans, objective estimates, coefficient of variation) do not impact the appropriateness of using the standard deviation to compare risk between two investments.

The Standard Deviation Is Appropriate to Compare the Risk Between