CVS

Definition

CVS, or Coefficient of Variation of Standard Deviation, measures the relative risk of an asset by comparing the standard deviation to the mean return. It is used to assess the risk per unit of return for different investments.

5 Must Know Facts For Your Next Test

1. CVS is calculated as the standard deviation divided by the mean return.
2. A lower CVS indicates a more favorable risk-return profile.
3. It allows for comparison between assets with different means and standard deviations.
4. CVS is expressed as a percentage, making it easier to compare across various assets.
5. Investors use CVS to determine which investment offers the most return for a given level of risk.

Review Questions

• How is CVS calculated?
• Why might investors prefer assets with a lower CVS?
• What does a higher CVS indicate about an asset's risk-return profile?

Related terms

Standard Deviation: A measure of the dispersion or variability in a set of financial returns.

Mean Return: The average expected return from an investment over a specified period.

Risk-Return Tradeoff: The principle that potential return rises with an increase in risk.