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CFA Level 3
Portfolio Management and Wealth Planning

Understanding Standard Deviation in Risk Measurement

Very Easy Risk Management Measuring Risk

Alice is an investment advisor working with a client who wants to understand the risk associated with their investment portfolio. She explains that an important measure of risk is how much the returns on the portfolio could deviate from the expected returns. To quantify this deviation, Alice introduces the concept of standard deviation.

Which of the following best describes the standard deviation in the context of measuring investment risk?

Hint

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Correct16.5K
% Correct86%