Question

Why beta s better measure of risk then standard deviation?

Answer 1

Modern portfolio statistics attempt to show how an investment's volatility and return measure against a given benchmark, such as U.S. Treasury bills. Beta and standard deviation are measures by which a portfolio or fund's level of risk is calculated. Beta compares the volatility of an investment to a relevant benchmark while standard deviation compares an investment's volatility to the average return over a period of time. Standard deviation tells an investor a more general story about the security's tendency to move up and down abruptly, while beta tells the investor how much higher or lower a security will likely trade in relation to an index.