Recommendations & StrategiesQuestion 68 of 110
An adviser evaluating two portfolios with equal returns should generally prefer the one with which characteristic?
a.The higher standard deviation
b.The higher beta
c.The lower standard deviation
d.The lower correlation to Treasury bills
Explanation
When two portfolios offer the same expected return, the one with lower standard deviation carries less risk and is therefore more efficient. Rational, risk-averse investors prefer less volatility for the same reward. This risk-adjusted thinking underlies measures like the Sharpe ratio.
Practice all 110 questions free — no signup required.
Related questions on this topic
- Which statement about a 529 college savings plan is accurate?
- An investor holds a portfolio of 30 stocks across many industries. Which risk remains that cannot be diversified away?
- A required minimum distribution (RMD) generally applies to which type of account?
- The present value of a future stream of retirement income needs is most affected by which assumption?
- Which order type guarantees execution but not price?
- A sector rotation strategy involves which of the following?
Last reviewed: · editorial process
PrepPass Editorial Team · Verified against NASAA Series 65 Investment Adviser Law Exam · How we review