CFA Practice Question

CFA Practice Question

Stock A has a higher expected return than stock B. Then, the variance of stock B
A. must be lower than that of A.
B. can be higher or lower than, or equal to that of A.
C. must be higher than that of A.
Explanation: Note that for individual stocks, there is no direct relationship between expected return and standard deviation. Only when the non-systematic risk is eliminated that such a relationship arises and then so only when people consider variance as the sole measure of risk.

User Contributed Comments 2

User Comment
indrayudha I tried answering this by following the rule of no absolute, thus "never" and "must" doesn't apply for CFA questions. Got it right this time.
Sheeb Lol, I wonder exactly how true this technique is of avoid answers that have "never" and "must" in them. Next time I guess I'll give it a try.
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