Asked by Arlissa Montano on Jun 20, 2024
Verified
For a stock that displays a large standard deviation,the returns may be high but risk is high too.
Standard Deviation
A measure of the amount of variation or dispersion of a set of values, indicating how much the values deviate from the mean.
Returns
Returns are the profits or losses generated from an investment over a specified period, often expressed as a percentage of the initial investment amount.
Risk
The possibility of loss or another adverse outcome resulting from a particular action or event.
- Understand the creation and analysis of frequency distributions.
Verified Answer
FA
Fatma AlnaaimiJun 27, 2024
Final Answer :
True
Explanation :
A large standard deviation is an indicator of high volatility in a stock's returns, which means that there is a greater range of possible outcomes and more uncertainty about future returns. While this may provide the potential for higher returns, it also increases the risk of experiencing significant losses. Therefore, a stock with a large standard deviation is generally considered to be more risky.
Learning Objectives
- Understand the creation and analysis of frequency distributions.