Question

The ________ is a measure of relative dispersion used in comparing the risk of assets with differing expected returns.  

Select one:

a. standard deviation

b. coefficient of variation

c. mean

d. Variance

Answer 1

The coefficient of variation is a measure of relative dispersion used in comparing the risk of assets with differing expected returns

Coefficient of Variation is calculated using the formula:

Coefficient of variation = Standard deviation/Expected return

The measure of relative dispersion i.e., coefficient of variation helps in comparing different data sets as it is a dimensionless measure. Lower CV implies better risk-return tradeoff and hence a better investment.

Answer -> coefficient of variation (Option b)