The primary difference between the standard deviation and the coefficient of variation as measures of risk is:
A)the coefficient of variation is easier to compute.
B)the standard deviation is a measure of relative risk whereas the coefficient of variation is a measure of absolute risk.
C)the coefficient of variation is a measure of relative risk whereas the standard deviation is a measure of absolute risk.
D)the standard deviation is rarely used in practice whereas the coefficient of variation is widely used.

Question

Quizplus · Accepted Answer

The primary difference between the standard deviation and the coefficient of variation is that the coefficient of variation is a measure of relative risk, while the standard deviation is a measure of absolute risk. The coefficient of variation is calculated as the ratio of the standard deviation to the mean, which enables comparison of risk between two investments with different means.

The Primary Difference Between the Standard Deviation and the Coefficient