An Argument for 'Generalized' Mean-Coefficient of Variation (MCV) Analysis

Abstract

The article discusses the coefficient variation (CV) in investment returns. The mean-coefficient of variation (MCV) efficiency criterion is presented as an alternative to the mean-standard deviation (MSD) definition of efficiency. The differences in MCV and MSD definitions of efficiency are examined in this article on the basis of investors' risk preferences. Corporate decision makers, though they do not know the range of risk aversion coefficients for stockholders, they assume there is a finite range and this enables MCV to evaluate alternative risky ventures.