1 Recession 2008-2010
2 Normal 2010-2012
3 Boom 2012-2014
Equity Returns (%) Probability
1 5 0.2
2 10 0.6
3 15 0.2
Ri R(Me...
• The greater the standard deviation of return,
the greater, the variability of returns and the
greater the risk of the as...
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  1. 1. 1 Recession 2008-2010 2 Normal 2010-2012 3 Boom 2012-2014 Equity Returns (%) Probability 1 5 0.2 2 10 0.6 3 15 0.2 Ri R(Mean) Ri -R (Mean) (Ri - R (Mean))2 Pri (Ri - R (Mean))2 *Pri 5 10 -5 25 0.2 5 10 10 0 0 0.6 0 15 10 5 25 0.2 5 10
  2. 2. • The greater the standard deviation of return, the greater, the variability of returns and the greater the risk of the asset • The larger the CV, the larger the relative risk of the asset.

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