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The standard deviation or volatility (square root of the variance) of returns.

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βˆ™ 2012-09-12 14:01:44
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Q: What is used as a measure of total risk?
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Related questions

Does standard deviation measure systematic or unsystematic risk?

Standard deviation is a measure of total risk, or both systematic and unsystematic risk. Unsystematic risk can be diversified away, systematic risk cannot and is measured as Beta.

Can bond ratings be used as a measure of the bond's risk?

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The total risk of a single asset is measured by the standard deviation of return on asset. Standard deviation is the square root of variance. To measure variance, you must have some distribution/ possibility of asset returns. However, the relevant risk of a single asset is the systematic risk, not the total risk. Systematic risk is the risk that cannot be diversified away in a portfolio. Systematic risk of an asset is measured by the Beta. Beta can be found using Regression (between market return and asset's return) or Covariance formula.

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