When the dispersion of returns on a stock is very spread out from its mean return,...

When the dispersion of returns on a stock is very spread out from its mean return, this indicates _______.

the stock has zero risk.
the stock's future return is very stable and certain.
the stock has low level of risk.
the stock has high level of risk.

Expert Solution

Option (d) is correct

When the dispersion of returns on a stock is very spread out from its mean return, this indicates that the stock has high level of risk. This risk is measured by the standard deviation. When the standard deviation is high, it would mean that the stock has high volatility / variance. High volatility stocks are riskier.

ekkarill92 answered 2 years ago

Does Spread mean the same as Dispersion and Variability? Explain your answer.

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