Question
In: Finance
What metric is the most relevant measure of any stock/s risk? Explain your answer.
What metric is the most relevant measure of any stock/s risk? Explain your answer.
Solutions
Expert Solution
STANDARD DEVIATION is the most relevant measure of the risk associated with the stock because standard deviation is not just including the systematic risk associated with the stock, but it is also including the idiosyncratic risk associated with the investment.
Standard deviation will be reflecting the overall risk associated with investment in relation to the stock because standard deviation believes that individual stock do have unsystematic risk and is not completely eliminated and it is also believing that there are systematic factors in the market which are impacting the overall rate of return of the stock and it is also reflected the volatility of the return of the stocks in a certain time frame so it is a well defined measure which will be providing us with the perception of the risk which is associated with the overall investment into the stocks.
Beta is only representative of the systematic risk and hence we are not considering beta.
Hence, it can be said that standard deviation is the most important metric which will be applied when we will be considering risk associated with the investment in stock.
jeff jeffy answered 2 years agoRelated Solutions
explain why CAPM beta is thought to be a more relevant measure of risk than standard...
In your own words, explain what is meant by OH&S risk and risk assessment.
Finally examine how each measure relates to excess returns and the relevant risk. In your analysis...
What statistical measure do we initially use for the relevant or non-diversifiable risk?
Explain why most macroeconomists do not need to precisely measure the initial capital stock in their...
Answer the following, citing relevant legislation and case law in your answer: a) What is the...
Answer the following, citing relevant legislation and case law in your answer: a) What is the...
Population(s) affected: What population(s) is/are at highest risk of contracting the disease? Are there any groups...
What theory of motivations makes the most sense for you? Explain your answer based on your...
Be sure your answer is complete and include any relevant diagrams and examples. 3 paragraphs minimum....
- Sample 80 80 80 81 81 64 65 65 66 67 67 67 71 71 72...
- What is a personal justification system and how do we put this into practice (perhaps every...
- Research and include the following: Security Risk Mitigation Plan: Select and document security policies and controls....
- How does deforestation tie into climate change?
- Calculate the following: (Show all work) (a) the unit cell volume of lead (FCC), assuming an...
- What type of costs does implementing flexible work arrangements have on an organization and/or employer?
- Dell In January 2006, Dell, the world’s largest computer maker, announced plans to setup its fourth...