Measures of Central Tendency and DispersionMCQMTP June 2023 Series IQuestion 3200 of 473
All Questions

Which of the following is the best measure to calculate the volatility of stock market?

Options

ACovariance
BStandard Deviation
CVariance
DAll of the above
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Correct Answer

✅ Option b — Standard Deviation

All Options:

  • ACovariance
  • BStandard Deviation
  • CVariance
  • DAll of the above

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Detailed Solution & Explanation

**Analysis:** - **Covariance:** Measures the directional relationship between two variables. It does not measure absolute volatility of a single series. - **Variance:** Variance (σ2\displaystyle \sigma^2) measures dispersion but is in squared units — harder to interpret directly. - **Standard Deviation (SD):** SD is the square root of variance. It is expressed in the same units as the data, making it the most commonly used and interpretable measure of volatility in financial markets. In finance, **Standard Deviation** is the most widely accepted and standard measure for calculating the volatility of a stock's price. Hence, **Option B** is the correct answer.

About This Chapter: Measures of Central Tendency and Dispersion

Paper

Paper 3: Quantitative Aptitude

Weightage

12-15 Marks

Key Topics

Mean, Median, Mode, Range, Mean Deviation, Standard Deviation

The core foundation of Statistics. This chapter covers Mean (Arithmetic, Geometric, Harmonic), Median, Mode, and their properties. It also explores measures of spread like Range, Mean Deviation, Standard Deviation, and Quartile Deviation.

View Official ICAI Syllabus

Exam Strategy Tip

Do not just memorize formulas; ICAI loves asking about the mathematical properties (e.g., 'sum of deviations from the AM is always zero'). You can usually eliminate 2 options just by knowing the properties.

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