The reality of the Relationship Between the Return and the Standard Deviation as a Risk

• Author(s): Abbas Fadhil Resen
• Paper ID: 1703946
• Page: 170-181
• Published Date: 23-12-2022
• Published In: Iconic Research And Engineering Journals
• Publisher: IRE Journals
• e-ISSN: 2456-8880
• Volume/Issue: Volume 6 Issue 6 December-2022

Abstract

Financial management uses the standard deviation as a basic indicator to measure and evaluate the risk of the share or portfolio targeted for investment as one of the statistical dispersion measures adopted in this field. Standard deviation is also widely used in other financial indicators to assess the level of portfolio investment risk and performance. With all of these indicators, this type of investment is still subject to violent shocks, which result in financial crises and shocks that have negative effects on the performance of local, regional, and global financial markets. Here, the research seeks to check the validity of adopting the standard deviation index as a risk and the accuracy of the results that this statistical indicator gives to the investor in light of its wide use. The most important findings of the researcher have confirmed that there is a technique that can be followed to fix the fault that results from squaring the values. These values exist under the root which leads to the alteration of all return values into positive values and distorts the evaluation, we can do the process by separating positive returns from negative returns and then calculating the standard deviation of the return positive values as a safety indicator with a direct correlation. The rise of this indicator specifies a high percentage of profits that exceed its arithmetic average (average return). While another standard deviation depends on the negative return values (such as risk) because they show the level of losses that exceed its arithmetic mean. The higher the ratio is, the higher the risk will be, then compare them according to the client's level of risk and his level of profit-seeking. As for the most important recommendations acclaimed by the researcher are to adopt the standard deviation of negative observations only from the returns approved in the evaluation to calculate the risk among other indicators that adopt this indicator (the standard deviation) to reach wider indicators in use such as the ratio of Sharp and the calculation of systemic risk (beta) Add to the market deviation and variance.

Keywords

Risk and Return, Stocks, Financial markets, Capital return.

Citations

IRE Journals:
Abbas Fadhil Resen "The reality of the Relationship Between the Return and the Standard Deviation as a Risk" Iconic Research And Engineering Journals Volume 6 Issue 6 2022 Page 170-181

IEEE:
Abbas Fadhil Resen "The reality of the Relationship Between the Return and the Standard Deviation as a Risk" Iconic Research And Engineering Journals, 6(6)