Chartered Financial Analyst Level 1

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Explanation:

The coefficient of variation (CV) is a standardized measure of dispersion that expresses the risk (standard deviation) per unit of mean return. This makes it useful for comparing the risk-adjusted performance of different investments, especially when their means differ significantly.

Option A is correct because the CV directly measures the amount of risk (standard deviation) relative to the mean return.
Option B describes the Sharpe ratio, which measures the mean excess return (return above the risk-free rate) per unit of risk, not the CV.
Option C refers to the mean absolute deviation (MAD), which calculates the average of absolute deviations from the mean, not the CV.

Explanation:

Option A is correct because the CV directly measures the amount of risk (standard deviation) relative to the mean return.
Option B describes the Sharpe ratio, which measures the mean excess return (return above the risk-free rate) per unit of risk, not the CV.
Option C refers to the mean absolute deviation (MAD), which calculates the average of absolute deviations from the mean, not the CV.

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For a set of return observations, the coefficient of variation is best described as a measure of:

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Last updated: July 15, 2026 at 14:06

The risk per unit of mean return.

The mean excess return earned per unit of risk.

The average absolute deviation around the mean return.