Please boost your Plan to download papers

Got a tricky question? Receive an answer from students like you!
Try us!

# Standard Deviation - Essay Example

Essay

Miscellaneous

Pages 10 (2510 words)

## Summary

Every rational investor wants to invest money in an investment which will give him more money. But the question arises how can one make choice between a set of investments There are number of theories regarding how an investor view risk and prefers one investment over the other ones.

…
Get more done in less time

Let us write a custom essay on your topic

“Standard Deviation” with a personal
15% discount.

Order now
When the data points are spread apart and the bell-shaped curve is flat, the standard deviation -- and the variation -- is great.

Standard deviation with regard to finance can be defined as "Statistical measure that shows the likelihood of an investment to yield above- or below-average returns over a period of time. For example, if hypothetical XYZ Fund has an average annual total return of 11% and a standard deviation of 6.00, which means XYZ Fund's performance is likely to vary from a low of 5% to a high of 17%. Calculated by the fund, standard deviation is only relative to the asset class being measured." (2)

The standard deviation of investment returns is widely accepted as the best, and perhaps only commonly used indicator of portfolio risk in the investment management business. However, its usefulness is actually quite limited. In fact, relying on it can often produce misleading and inaccurate

conclusions. Although standard deviation does provide some insight, and in many circumstances is in fact meaningful but there are a number of flaws associated with relying on the standard deviation of returns as a risk measure.

The bigger flaw with standard deviation is that it isn't intuitive. ...

Download paper
Not exactly what
you need?

### Related Essays

Research Proposal Design
Standard deviation = $21,200. Standard deviation is calculated as the square root of the variance; variance is calculated as follows, where M is the mean and N is the total number of scores.…

MA205- Elementary Statistics
T critical is greater than T calculated so we accept the null hypothesis that the change as a result of training is equal to zero, therefore the training makes some positive change towards those who are mentally retarded.