Dispersion

    graph TD;
	    A[Investment A] -- Returns --> B[5%];
	    A -- Returns --> C[10%];
	    A -- Returns --> D[15%];
	    A -- Returns --> E[20%];
	
	    F[Investment B] -- Returns --> G[-20%];
	    F -- Returns --> H[10%];
	    F -- Returns --> I[30%];
	    F -- Returns --> J[40%];
	    
	    classDef lowDisp fill:#ffcc00;
	    classDef highDisp fill:#ff0000;
	    class A lowDisp;
	    class F highDisp;

## What does a higher dispersion indicate about an investment? - [x] Greater risk and potential for fluctuating returns - [ ] Lower risk and more stable returns - [ ] Inability to predict anything, including lunch - [ ] It means you should invest wisely > **Explanation:** Higher dispersion indicates more significant fluctuations in returns, pointing to higher risk. ## Which of these best describes what alpha measures? - [ ] The fun factor of your investment journey - [ ] Investment performance on a risk-adjusted basis - [ ] How enchanted an asset price becomes - [x] Outperformance compared to a benchmark > **Explanation:** Alpha measures how much an investment has beaten or lagged behind a benchmark index. ## A beta of 1 means: - [ ] A stock does a perfect pirouette with the market - [ ] That the stock's movements are inversely correlated - [ ] It’s just moving sideways - [x] The stock is expected to move in line with market volatility > **Explanation:** A beta of 1 implies that the stock will move in sync with overall market movements. ## Why measure dispersion when investing? - [ ] Because it sounds technical and fancy - [ ] To impress friends at cocktail parties - [x] To understand the range of potential outcomes in investments - [ ] So you can shout “more dispersion!” in joy > **Explanation:** Measuring dispersion helps investors gauge the risk and return landscape thoroughly. ## What might increased volatility mean for your investment? - [x] Bigger swings in your potential returns - [ ] A cozy blanket of safety - [ ] An easy decision to make - [ ] It means your stock is charming the market > **Explanation:** Increased volatility often means greater uncertainty and potentially larger swings in the investment’s price. ## How do both alpha and beta relate to investing decisions? - [x] They help measure risk-adjusted returns and market sensitivity - [ ] They tell you a fairy tale about your money - [ ] They simply offer good vibes only - [ ] They measure your desire to invest in pizza > **Explanation:** Alpha provides insight on performance while beta shows how sensitive the investment is to market movements. ## What would decreasing dispersion suggest? - [x] Reduced risk in expected returns - [ ] More twists and turns in an investment - [ ] It’s a sign to throw a party - [ ] An artist is creating a masterpiece > **Explanation:** A decrease implies that returns are becoming more predictable, signaling less risk for the investor. ## An investment with high dispersion is considered: - [ ] A safer choice - [ ] A rollercoaster without seat belts - [ ] Predictable and steady - [x] More precarious and riskier > **Explanation:** High dispersion means wide-ranging potential outcomes, and probably more ups and downs! ## What analysis method can help visualize dispersion? - [ ] Crystal ball gazing - [ ] Last year’s high school yearbook photos - [x] Historical volatility charts and statistical measures - [ ] An art gallery showcasing wild abstracts > **Explanation:** Analyzing charts helps investors understand volatility and dispersion effectively. ## How should an investor view high dispersion? - [ ] As a blessing and a curse wrapped in glitter - [ ] With excitement and lots of pillow forts - [x] As a warning sign for high-risk investments - [ ] As a perfect excuse for a pizza night > **Explanation:** High dispersion signals the potential for high fluctuations in returns—buckle up!