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DefinitionIntroductory

What are the two risk measures used by financial analysts to quantify the variability of an investment's returns as mentioned in the chapter?

The two risk measures used by financial analysts to quantify the variability of an investment's returns are variance and standard deviation.

Key points

  • Variance measures the average squared difference between realized returns and the expected return.
  • Standard deviation is the square root of the variance and indicates the dispersion of returns.
  • Both measures help assess the risk associated with an investment's returns.
Source:Financial Management: Principles and Applications· Debt Valuation and Interest Rates· p. 232–233
Cover of Financial Management: Principles and Applications

Financial Management: Principles and Applications

Sheridan Titman

Thirteenth Edition · Pearson

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