Variance Is a Measure of the Variability of Returns, and Since

question 91

True/False

Variance is a measure of the variability of returns, and since it involves squaring the deviation of each actual return from the expected return, it is always larger than its square root, its standard deviation.

---

Definitions:

Portfolio Diversification

An investment strategy aimed at reducing risk by allocating investments across various financial instruments, industries, or other categories.

Risk Premium

The additional return demanded by investors for taking on the higher risk associated with an investment, compared to a risk-free asset.

Unsystematic Risk

The risk associated with a specific company or industry, also known as diversifiable risk or idiosyncratic risk.

Market Risk

The risk of losses in positions arising from movements in market prices.