Which of the following statements is FALSE? a) Because investors dislike only ne

Question

Which of the following statements is FALSE?

a) Because investors dislike only negative resolutions of uncertainty, alternative measures that focus solely on downside risk have been developed, such as the semi-variance and the expected tail loss.

The standard deviation is the square root of the variance.

c) While the variance and the standard deviation both measure the variability of the returns, the variance is easier to interpret because it is in the same units as the returns themselves.

d) While the variance and the standard deviation are the most common measures of risk, they do not differentiate between upside and downside risk.

a) Because investors dislike only negative resolutions of uncertainty, alternative measures that focus solely on downside risk have been developed, such as the semi-variance and the expected tail loss.

The standard deviation is the square root of the variance.

c) While the variance and the standard deviation both measure the variability of the returns, the variance is easier to interpret because it is in the same units as the returns themselves.

d) While the variance and the standard deviation are the most common measures of risk, they do not differentiate between upside and downside risk.

Explanation / Answer

The third option is false. While the variance and the standard deviation both measure the variability of the returns, the variance is easier to interpret because it is in the same units as the returns themselves.

The standard is easier to interpret since it is in the same unit of original value. Variance value are in squares.

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