Flashcards in G Deck (8)
The difference between the maximum values and minimum values in a data set
Calc: Range = Max Value - Min Value
Mean Absolute Deviation
Calc: Return - Arithmetic Return + ... / N
Most common measures of dispersion (absolute dispersion: "the amount of variability present without comparison to any reference point or benchmark.")
Range: Max Value - Min Value INtep: A larger range of return implies more risk
MAD - "The mean absolute deviation uses all of the observations in the sample and is thus superior to the range as a measure of dispersion" Addresses the issue that the SD of the mean always equals 0 (because the -N's cancel each other out). Disadv. Difficult to manipulate mathematically (variance is better for this). Interp: A hhigher MAD implies more risk
Standard Deviation (population)
Population Variance (must know ev. member of a population aka need knowledge of pop. mean Mu)((parameter of a distribution, risk measure)
"Variance is defined as the average of the squared deviations around the mean.
"the population variance is the arithmetic average of the squared deviations around the mean."
adv: "variance takes care of the problem of negative deviations from the mean canceling out positive deviations by the operation of squar- ing those deviations"
Measured in squared units - also, it's the SD^2
Standard Deviation (parameter of a distribution, risk measure)
Standard deviation is the positive square root of the variance."
SD is useful to return variance to original units (since variance is measured in ^2'ed units): Expressed in the same unit of measurement as the observations
The statistic that measures the dispersion in a sample
Sample Standard Deviation