Question

QUESTION 01 (10 points) - Coefficient of Variation (CV) We need to compare volatility of multiple assets. As the assets have different variation ranges, e.g. a big stock versus a penny stock, it is useful to look at the coefficient of variation, not the standard deviation, as a measure of volatility. We have the following population data: Asset A Asset B Asset C Mean ($) 0.45 183.94 305.81 Standard deviation ($) 0.11 29.56 61.35 (a) [2] Give an equation for the coefficient of variation in percentage terms. (b)[6] Find volatility of the three assets. Use two decimals for percentages, e.g. 23.76%. (c)[2] Which asset is the least volatile? Which asset is the most volatile?

Answer 1

a)

Let me share equation for the coefficient of variation in percentage terms= (Standard Deviation of a asset/ Mean for that Asset)*100

b)

	Asset A	Asset B	Asset C
Mean	0.45	183.94	305.81
Standard Deviation	0.11	29.56	61.35
Volatility	=(0.11/0.45)*100=24.44%	=(29.56/183.94)*100=16.07%	=(61.35/305.81)*100=20.06%

c)

Here, asset B is least Volatile as, coefficient of variation (16.07%) is lowest for asset B and Asset A is Most volatile as coefficient of variation (24.44%) is highest for asset A.