20140508

standard deviation

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Term of the Day

standard deviation

1. InvestmentMeasure of the variability (volatility) of a security, derived from thesecurity's historical returns, and used in determining the range of possible futurereturns. The higher the standard deviation, the greater the potential for volatility.
2. Marketing: Measure of the difference between an average (arithmetic mean) and the individual values included in the average, such as the variation between the response to the same advertisement in different media vehicles.
3. StatisticsMeasure of the unpredictability of a random variable, expressed as the average deviation of a set of data from its arithmetic mean and computed as the positive square root of the variance. Customarily represented by the lower-case Greek letter sigma (s), it is ...
Learn more about this term
Usage Example
Before purchasing a security it is important to look at the standard deviationbecause it gives you an idea of how volatile the security could be in the future.
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