Final answer:
The statement is true; higher dispersion in an asset's returns indicates greater risk.
Step-by-step explanation:
The statement 'the greater the dispersion around an asset's expected return, the greater the risk' is True.
Risk in finance typically refers to the uncertainty associated with the returns on an asset. Having a wide range of possible returns, or a high dispersion, indicates greater uncertainty and therefore higher risk. For example, stocks are considered to have higher risk compared to bonds and savings accounts because their returns can vary much more significantly. While a high-risk investment can lead to higher returns, it can also result in substantial losses, and history has shown that excessive risk can be detrimental to an investment portfolio. Investment choices like bank accounts offer low risk with correspondingly low returns, while stocks, with their potential for higher returns, carry greater risk.