A type of risk (financial risk) that arises from the situation where an investment or asset has a dispersed range of possible returns. The wider the dispersed range, the riskier the investment/ asset is, and vice versa.
Widely dispersed range implies a highly risky investment due to the so many possible results for the return on that investment. A narrowly dispersed range is an indication of fewer possible results for the return on the investment- therefore, it can be perceived as a safer or riskless investment.
Dispersion risk is reflects the expected volatility of an investment/ asset, which can be measured using estimates or figures for expected return (the possible range), probabilities for the expected returns, and standard deviations (SD).
