Quantitative analysis

The Sharpe ratio measures risk-adjusted performance by dividing the portfolio's excess return over the risk-free rate by its standard deviation. Therefore, a higher excess return relative to volatility directly increases the ratio. Conversely, very high volatility (C) would increase the denominator, lowering the Sharpe ratio.

Skewness is the third standardized statistical moment that quantifies the degree of asymmetry in a probability distribution around its mean. Distractors like variance and standard deviation are incorrect because they measure the dispersion or spread of the data rather than its directional bias.

The standard normal distribution is a specific case of the normal distribution defined to have a mean of 0 and a standard deviation of 1. A diagram for this topic isn't available yet — the worked example below walks the same reasoning step by step.

• !Option A is incorrect because a standard deviation of 0 would collapse the distribution into a single point, removing all variability.
• !Option A is incorrect because a coefficient of 0, not -1, represents the absence of a linear relationship.
• !Distractors like variance and standard deviation are incorrect because they measure the dispersion or spread of the data rather than its directional bias.

Answer each from memory — you'll see instantly whether you're right and why.

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