Financial analysts like to use the standard deviation as a measure of risk for a stock. The

Question:

Financial analysts like to use the standard deviation as a measure of risk for a stock. The greater the deviation in a stock price over time, the more risky it is to invest in the stock. However, the average prices of some stocks are considerably higher than the average prices of others, allowing for the potential of a greater standard deviation of price. For example, a standard deviation of $5.00 on a $10.00 stock is considerably different from a $5.00 standard deviation on a $40.00 stock. In this situation, a coefficient of variation might provide insight into risk. Suppose Stock X costs an average of $13.21 per share and has shown a standard deviation of $5.28 for the past 30 days. Suppose Stock Y costs an average of $2.52 per share and has shown a standard deviation of $0.50 for the past 30 days. Use the coefficient of variation to determine the variability for each stock. Based on the coefficient of variation, which is the riskier stock?

Stocks
Stocks or shares are generally equity instruments that provide the largest source of raising funds in any public or private listed company's. The instruments are issued on a stock exchange from where a large number of general public who are willing...

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