You are comparing three firms over a period of several years…
You are comparing three firms over a period of several years. Firm A displayed average returns of 45% with a standard deviation of 15, Firm B displayed average returns of 50% with a standard deviation of 16.5, and Firm C displayed average returns of 47% with a standard deviation of 16. Which firm had greater variability in earnings based on the coefficient of variation?
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Assume that the correlation coefficient were .5 instead of -.35. Would this increase or decrease the overall portfolio standard deviation (holding expected return and standard deviation and weighting of each fund constant from the previous question)?
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