The standard deviation is generally more useful than the variance because:
A)It is easier to calculate
B)Variance is a measure of risk, where standard deviation is a measure of return
C)Standard deviation is calculated in the same units as payoffs and variance isn't
D)It can measure unquantifiable risk

Question

Quizplus · Accepted Answer

Standard deviation and variance are both measures of dispersion, but variance gives a squared value which is not in the same units as the original data. Standard deviation, on the other hand, is calculated by taking the square root of variance, which brings it back to the original units of the data. This makes it more useful for interpretation and comparison purposes. Choice A is incorrect because standard deviation is not necessarily easier to calculate than variance. Choice B is incorrect because both standard deviation and variance can be used as measures of risk or return. Choice D is incorrect because standard deviation, like variance, only measures quantifiable risk.

The Standard Deviation Is Generally More Useful Than the Variance