Measured by the standard deviation

Reference no: EM13249813

Babish's standard deviation of returns is greater than Cornell's (40% vs. 32%), but Cornell's expected return is greater than Babish's (15% vs. 12%). Therefore, Babish has more risk (as measured by the standard deviation) but a lower expected return. Andre is a risk-averse, as are the other investors in the market. Does this mean the market is in disequilibrium?

Reference no: EM13249813

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Measured by the standard deviation : Babish's standard deviation of returns is greater than Cornell's (40% vs. 32%), but Cornell's expected return is greater than Babish's (15% vs. 12%). Therefore, Babish has more risk (as measured by the standard deviation) but a lower expected return.

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