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NISM Certifications · NISM-Series-V-A: Mutual Fund Distributors · Mutual Fund Scheme Performance

Which statement about a scheme's standard deviation as a performance measure is correct?

Standard deviation measures how much a scheme's returns vary around its average return. A higher figure means greater volatility and total risk. Sensitivity to the market is measured by beta, and outperformance relative to the benchmark is a separate measure.

  1. AA higher standard deviation indicates lower volatility of returns
  2. BIt measures the scheme's sensitivity to the market index
  3. CIt measures the variability of the scheme's returns around its average returnCorrect
  4. DIt is the excess return over the benchmark

Explanation

Standard deviation captures how widely returns fluctuate around their mean, so higher values mean greater total volatility. Sensitivity to the market is beta, and excess return over the benchmark is alpha-type measurement.

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