The greatest shortcoming of standard deviation as a measure of volatility is
A) it discriminates in favor of investments with volatility on the "downside"
B) it discriminates in favor of investments with volatility on the "upside"
C) it is normally distributed meaning the possibility of an "upside" outcome is just as likely as a "downside" outcome
D) volatility is averaged rather than incremental

Question

Quizplus · Accepted Answer

Standard deviation treats all deviations from the mean equally, whether they are positive or negative. This means it does not differentiate between upside and downside volatility, potentially favoring investments with upside volatility.

The Greatest Shortcoming of Standard Deviation as a Measure of Volatility