# Relative Variability Stats Assignment Homework Help

Relative Variability

The sizes of the variations in past prices of a stock are one indicator of the risk involved in buying the stock. If two stocks have average prices which are nearly the same, then the stock with the greater standard deviation would seem to be the riskier. However, if the average prices differ markedly, comparative risk is indicated by their relative variability as measured by their
coefficients of variation:

This coefficient expresses (T as a percent of u; so if the coefficient is, say, 30 percent, then (T is 30 percent as large as u:
EXERCISE The stock of Highprice, Inc., has been selling at a price averaging J-L = \$250 per share with.p· = \$40. Lowprice, Inc., averages J-L = \$20 with IT = \$5. (a) Which stock has exhibited the greater variability? (b) Which stock seems to be the more risky?
ANSWER (a) If we compare only standard deviations, then High price is much more variable than Low price. (b) The respective coefficients of variability for High price and Low price are 16 and 25 percent; so Low price appears to be the more risky stock.

Posted on August 27, 2014 in DATA SUMMATION:Measures Of Central Treading and Variability
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