Question

If two investments have the same expected value, but one has a higher variance and standard...

If two investments have the same expected value, but one has a higher variance and standard deviation, what does that tell you about the investment with the higher Variance/standard deviation?

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Answer #1

Two investment having same expected return but different standard deviation means that the investment with higher standard deviation is more risky and volatile than the other investment. This also indicates that the fluctuation in return of the investment with higher standard deviation will be higher and is also not an optimal investment. The investment is not an optimal investment because it provides the same return like the other investment but with higher risk.

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