Question

The variance of a stock's returns can be calculated as the:
a. square root of the average value of deviations from the mean.
b. average value of squared deviations from the mean.
c. sum of the deviations from the mean.
d.average value of deviations from the mean.

Answer 1

Answer:

The correct option is b.

Step-by-step explanation:

The formula for standard deviation is

$\sigma^2=\frac{\sum {(x-\overline{x})^2}}{n}$

where, $\overline{x}$ is mean of the data and n is number of observation.

The variance of a stock's returns can be calculated by the above formula.

Variance of stock's returns is the average value of squared deviations from the mean.

Therefore the correct option is b.