Recommendations & StrategiesQuestion 69 of 100
When comparing two portfolios with the same return, the one with the LOWER standard deviation is generally considered:
a.Riskier and less desirable
b.Guaranteed to outperform
c.Identical in every respect
d.Less volatile and thus more attractive on a risk-adjusted basis
Explanation
Standard deviation measures total volatility; for equal returns, the portfolio with lower standard deviation delivers those returns with less risk. Risk-averse investors prefer the less volatile portfolio. This underlies risk-adjusted performance comparisons.
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