Question

Coefficient of variation is useful to study

• A. Risk
• B. Disparity
• C. Consistency
• D. All of the above

Answer 1

The Correct Option is D

The coefficient of variation (CV) is a statistical measure of the relative variability. It is the ratio of the standard deviation to the mean, expressed as a percentage. The formula for the coefficient of variation is:

\( CV = \left(\frac{\text{Standard Deviation}}{\text{Mean}}\right) \times 100\% \)

Here's why the coefficient of variation is useful for studying each term:

• Risk: CV is commonly used in assessing the risk between investments with different expected returns, as it provides a standardized measure of risk per unit of return.
• Disparity: It helps to understand the disparity between datasets, especially when comparing relative variability.
• Consistency: A lower CV indicates higher consistency within a dataset, making it useful to assess the consistency of data over periods or among different datasets.
• All of the above: Since CV can be utilized in evaluating risk, disparity, and consistency, it is indeed useful to study all these aspects.

The correct answer is: All of the above.