The chart below gives information for four classes of U.S. securities over the 50-year time period from 1950-1999. Order the securities from highest average annual return to lowest for this time period. Now rank the securities from highest to lowest based on risk. Is the information consistent with what financial theory tells us? Why or why not?

Class of Security Average Annual Return Standard Deviation

1950-1999

Small Stocks 17.10% 29.04%

Large Stocks 14.89% 16.70%

Long-term Government Bonds 5.94% 9.49%

3-Month U.S. Treasury Bills 5.23% 2.98%