Compare S&P 500 and volatility strategies (Ang (2014)): Below is a graph that compares the cumulative wealth obtained from investing $1 in March 1989 from two strategies: investing in the S&P 500 equity index and volatility strategy. Volatility strategy is an investment strategy that earns premiums during stables times (essentially equivalent to selling volatility insurance), but has large losses during volatile times such as the financial crisis of 2008-09.

Which one of the following is a limitation of using mean-variance preferences in comparing these two strategies?

Question options:

	It does not account for tail events.
	It takes into account only expected returns of each strategy
	It takes into account only the volatility of each strategy

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