Variation coefficient mostly considered better risk measure
What is the reason that variation coefficient mostly considered a better risk measure while comparing different projects than the standard deviation?
Expert
a) Every time we wish to evaluate the risk of investments having different means, we make use of the coefficient of variation (CV). b) The CV corresponds to the percentage of mean’s standard deviation. Since the CV is a ratio, it alters according to differences in means, whereas the standard deviation does not. As a result the CV offers a standardized measure of the risk degree that can be utilized to evaluate alternatives.
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