Conceptually, the difference between the standard deviation of a stock’s return

Question

Conceptually, the difference between the standard deviation of a stock’s return and its semi-standard deviation is:

a. The standard deviation is always twice the value of the semi-standard deviation.

b. The standard deviation measures the dispersion above and below the mean value, while the semi-standard deviation measures dispersion either only above or below the mean value.

c. The standard deviation is always symmetric while the semi-standard deviation may be skewed.

d. Standard deviations can be calculated in percentage and dollar terms, while semi standard deviation can only be calculated in percentage terms.

Explanation / Answer

The semi-standard deviation of the stock’s return over a time period for only those months where returns were below the average return. This measure allows potential investors to understand how much downside volatility the stock has experienced, versus standard deviation, which examines all volatility-upside and downside.

The standard deviation is cannot be always twice the value of the semi-standard deviation. So option (a) is incorrect.

The standard deviation measures the dispersion above and below the mean value, while the semi-standard deviation measures dispersion either only below the mean value. So option (b) is incorrect.

The standard deviation and semi-standard deviations cannot be calculated in percentage terms, so option (d) is incorrect.

The standard deviation is always symmetric as standard deviation measures the dispersion above and below the mean value while the semi-standard deviation may be skewed as semi-standard deviation measures dispersion either only below the mean value. So option (c) is correct.

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.