The Standard Deviation of the Returns of Stock a Is

question 7

Multiple Choice

The standard deviation of the returns of Stock A is 45.9 percent, and the standard deviation of the returns of Stock B is 52.7 percent. Which of the following statements about the stocks is correct?

• A)Stock A has a wider (more dispersed) probability distribution than Stock B, and hence lower total risk.
• B)Stock A has a tighter probability distribution than Stock B, and hence lower total risk.
• C)Stock B has a wider (more dispersed) probability distribution than Stock A, and hence lower total risk.
• D)Stock B has a tighter probability distribution than Stock A, and hence lower total risk.
• E)Stock B has a lower risk than Stock A, but nothing can be said about their probability distributions.

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Definitions:

Replication

The process of repeating a study or experiment to verify its findings or to ensure the reliability of the results.

Experimenter Bias

A form of bias introduced by the experimenter whose expectations about the outcome of the experiment can potentially influence the results.

Social Desirability Bias

The propensity of survey participants to give answers they feel will be received well by others.

Sampling Bias

A statistical bias that occurs when the sample chosen for a study is not representative of the population from which it was drawn.