standard deviation

paulus1981
Mind Map by , created about 6 years ago

Mas AF4 - Investment Planning (Measuring and comparing the performance of two funds) Mind Map on standard deviation, created by paulus1981 on 09/06/2013.

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paulus1981
Created by paulus1981 about 6 years ago
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standard deviation
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2 calculation:

Annotations:

  • * obtain the arithmetic mean * obtain the set of deviations from the mean * square each deviation * divide the sum of the squared deviations by the number of observations to obtain the population variance * take the square root of the variance to obtain the standard deviation
3 represents the average amount by which the values in the distribution deviate from the arithmetic mean
4 normal distributions
4.1 68.26% - two thirds within one standard deviation
4.2 95.5% of all observations within two standard deviations
4.3 99.75% of all observations within three standard deviations of the mean
5 limitation
5.1 actual returns are not neatly/symmetrically dispersed
5.1.1 most long-run distributions of equity returns are positively skewed
6 The most commonly used method to quantify risk
7 Measures how widely dispersed are the possible outcomes around the mean expected outcome
8 measures non-systemic risk