A potential drawback of using the standard deviation to measure risk is that
A) positive and negative deviations from the mean cancel each other out.
B) both positive and negative deviations are included to compute deviations around the mean.
C) the probability distribution of returns is symmetrical.
D) None of the above.

Question

Quizplus · Accepted Answer

Standard deviation includes both positive and negative deviations from the mean, which means it treats all deviations as equal in terms of risk, even though only negative deviations might be considered risky in some contexts.

A Potential Drawback of Using the Standard Deviation to Measure