What term measures the periodic change in returns relative to the average return, with greater changes indicating higher risk?

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Multiple Choice

What term measures the periodic change in returns relative to the average return, with greater changes indicating higher risk?

Volatility measures how much investment returns swing around the average. When those returns bounce up and down a lot, the range of possible outcomes is wider, signaling higher risk because you can experience larger gains or larger losses. In practice, volatility is often assessed by the standard deviation of returns, so assets with higher volatility have greater risk. Liquidity is about how easily you can buy or sell an asset without impacting its price. Diversification is the strategy of spreading investments to reduce overall risk. Volumes refer to how much of a security is traded. These relate to different concepts and do not measure the variability of returns the way volatility does.

Volatility measures how much investment returns swing around the average. When those returns bounce up and down a lot, the range of possible outcomes is wider, signaling higher risk because you can experience larger gains or larger losses. In practice, volatility is often assessed by the standard deviation of returns, so assets with higher volatility have greater risk.

Liquidity is about how easily you can buy or sell an asset without impacting its price. Diversification is the strategy of spreading investments to reduce overall risk. Volumes refer to how much of a security is traded. These relate to different concepts and do not measure the variability of returns the way volatility does.

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