From 1950 to 2007, the average return in the stock market, as measured by the S&P 500, was 13.2 percent and a standard deviation of 17 percent. Given this information, which of the following statements is correct?
A)With an average return this high, it are unlikely that an investor will lose money in the stock market in the next year or two.
B)With a standard deviation this high, it are likely that an investor will lose money in some years over a 25-year investment period.
C)This investment are not very good since the standard deviation are greater than the average return.
D)All of these statements are correct.

Question

Quizplus · Accepted Answer

A high standard deviation indicates a high level of volatility in the market, which means that there is a greater likelihood of losing money in some years over a long investment period, despite the high average return. Therefore, statement B is correct while statements A, C, and D are incorrect.

From 1950 to 2007, the Average Return in the Stock