Financial Terms dispersion

# Definition of dispersion

## dispersion

the degree of variability or difference; it is measured
as the vertical distance of an actual point from the
estimated regression line in least squares regression analysis

# Related Terms:

## Standard deviation

The square root of the variance. A measure of dispersion of a set of data from their mean.

## Variance

A measure of dispersion of a set of data points around their mean value. The mathematical
expectation of the squared deviations from the mean. The square root of the variance is the standard deviation.

## Standard Deviation

A statistical term that measures the dispersion of a variable
around its expected value. The standard deviation is often used as
a measure of risk when applied to a return on an investment.

## coefficient of correlation

a measure of dispersion that indicates the degree of relative association existing between two variables

## coefficient of determination

a measure of dispersion that
indicates the â€śgoodness of fitâ€ť of the actual observations
to the least squares regression line; indicates what proportion
of the total variation in y is explained by the regression model

## correlation analysis

an analytical technique that uses statistical
measures of dispersion to reveal the strength of the
relationship between variables

## standard error of the estimate

a measure of dispersion that reflects the average difference between actual observations and expected results provided by a regression line

## Variance

The dispersion of a variable. The square of the standard deviation.

## Committee, AIMR Performance Presentation Standards Implementation Committee

The Association for Investment Management and Research (AIMR)'s Performance Presentation standards Implementation
Committee is charged with the responsibility to interpret, revise and update the AIMR Performance
Presentation standards (AIMR-PPS(TM)) for portfolio performance presentations.

## Covariance

A statistical measure of the degree to which random variables move together.

## Gold exchange standard

A system of fixing exchange rates adopted in the Bretton Woods agreement. It
involved the U.S. pegging the dollar to gold and other countries pegging their currencies to the dollar.

## Gold standard

An international monetary system in which currencies are defined in terms of their gold
content and payment imbalances between countries are settled in gold. It was in effect from about 1870-1914.

## Mean-variance analysis

Evaluation of risky prospects based on the expected value and variance of possible outcomes.

## Mean-variance criterion

The selection of portfolios based on the means and variances of their returns. The
choice of the higher expected return portfolio for a given level of variance or the lower variance portfolio for
a given expected return.

## Mean-variance efficient portfolio

Related: Markowitz efficient portfolio

## Minimum-variance frontier

Graph of the lowest possible portfolio variance that is attainable for a given
portfolio expected return.

## Minimum-variance portfolio

The portfolio of risky assets with lowest variance.
Minority interest An outside ownership interest in a subsidiary that is consolidated with the parent for
financial reporting purposes.

## Portfolio variance

Weighted sum of the covariance and variances of the assets in a portfolio.

## Serial covariance

The covariance between a variable and the lagged value of the variable; the same as
autocovariance.

## Standard error

In statistics, a measure of the possible error in an estimate.

## Standardized normal distribution

A normal distribution with a mean of 0 and a standard deviation of 1.

## Standardized value

Also called the normal deviate, the distance of one data point from the mean, divided by
the standard deviation of the distribution.

## Statement of Financial Accounting Standards No. 8

This is a currency translation standard previously in
use by U.S. accounting firms. See: Statement of Accounting standards No. 52.

## Statement of Financial Accounting Standards No. 52

This is the currency translation standard currently
used by U.S. firms. It mandates the use of the current rate method. See: Statement of Financial Accounting
standards No. 8.

## Variance minimization approach to tracking

An approach to bond indexing that uses historical data to
estimate the variance of the tracking error.

## Variance rule

Specifies the permitted minimum or maximum quantity of securities that can be delivered to
satisfy a TBA trade. For Ginnie Mae, Fannie Mae, and Feddie Mac pass-through securities, the accepted
variance is plus or minus 2.499999 percent per million of the par value of the TBA quantity.

## Standard costs

A budget cost for materials and labour used for decision-making, usually expressed as a per unit cost that is applied to standard quantities from a bill of materials and to standard times from a
routing.

## Variance analysis

A method of budgetary control that compares actual performance against plan, investigates the causes of the variance and takes corrective action to ensure that targets are achieved.

## budget variance

the difference between total actual overhead
and budgeted overhead based on standard hours allowed
for the production achieved during the period; computed
as part of two-variance overhead analysis; also
referred to as the controllable variance

## controllable variance

the budget variance of the two variance approach to analyzing overhead variances

## Cost Accounting Standards Board (CASB)

a body established by Congress in 1970 to promulgate cost accounting
standards for defense contractors and federal agencies; disbanded
in 1980 and reestablished in 1988; it previously issued
pronouncements still carry the weight of law for those
organizations within its jurisdiction

## ethical standard

a standard representing beliefs about moral
and immoral behaviors

## expected standard

standard set at a level that reflects what
is actually expected to occur in the future period; it anticipates
future waste and inefficiencies and allows for them;
is of limited value for control and performance evaluation purposes

the difference between the total actual fixed overhead and budgeted fixed overhead;
it is computed as part of the four-variance overhead analysis

see volume variance

## ideal standard

a standard that provides for no inefficiencies
of any type; impossible to attain on a continuous basis

## labor efficiency variance

the number of hours actually worked minus the standard hours allowed for the production
achieved multiplied by the standard rate to establish
a value for efficiency (favorable) or inefficiency (unfavorable)
of the work force

## labor mix variance

(actual mix X actual hours X standard rate) - (standard mix X actual hours X standard rate);
it presents the financial effect associated with changing the
proportionate amount of higher or lower paid workers in production

## labor rate variance

the actual rate (or actual weighted average rate) paid to labor for the period minus the standard rate multiplied by all hours actually worked during the period;
it is actual labor cost minus (actual hours X standard rate)

## labor yield variance

(standard mix X actual hours X standard rate) - (standard mix X standard hours X standard rate);
it shows the monetary impact of using more or fewer total hours than the standard allowed

## material price variance

total actual cost of material purchased
minus (actual quantity of material  standard
price); it is the amount of money spent below (favorable)
or in excess (unfavorable) of the standard price for the
quantity of materials purchased; it can be calculated based
on the actual quantity of material purchased or the actual
quantity used

## material quantity variance

(actual quantity X standard price) - (standard quantity allowed  standard price);
the standard cost saved (favorable) or expended (unfavorable)
due to the difference between the actual quantity
of material used and the standard quantity of material
allowed for the goods produced during the period

## material mix variance

(actual mix X actual quantity X standard price) - (standard mix X actual quantity X standardprice);
it computes the monetary effect of substituting a nonstandard mix of material

## material yield variance

(standard mix X actual quantity X standard price) - (standard mix X standard quantity X standard price);
it computes the difference between the
actual total quantity of input and the standard total quantity
allowed based on output and uses standard mix and
standard prices to determine variance

## noncontrollable variance

it is computed as part of the two-variance approach to overhead analysis

the difference between total budgeted overhead at actual hours and total budgeted
overhead at standard hours allowed for the production
achieved; it is computed as part of a three-variance analysis;
it is the same as variable overhead efficiency variance

the difference between total actual overhead and total budgeted overhead at actual
hours; it is computed as part of three-variance analysis; it
is equal to the sum of the variable and fixed overhead
spending variances

## perfection standard

see ideal standard

## practical standard

a standard that can be reached or slightly
exceeded with reasonable effort by workers; it allows for
normal, unavoidable time problems or delays and for
worker breaks; it is often believed to be most effective in
inducing the best performance from workers, since such
a standard represents an attainable challenge

## standard

a model or budget against which actual results are
compared and evaluated; a benchmark or norm used for
planning and control purposes

## standard cost

a budgeted or estimated cost to manufacture
a single unit of product or perform a single service

## standard cost card

a document that summarizes the direct
material, direct labor, and overhead standard quantities and
prices needed to complete one unit of product

## standard cost system

a valuation method that uses predetermined
norms for direct material, direct labor, and overhead
to assign costs to the various inventory accounts and
Cost of Goods Sold

## standard error of the estimate

a measure of dispersion that reflects the average difference between actual observations and expected results provided by a regression line

a predetermined overhead rate used in a standard cost system; it can be a separate variable or fixed rate or a combined overhead rate

## standard quantity allowed

the quantity of input (in hours or some other cost driver measurement) required at standard for the output actually achieved for the period

the difference between total actual overhead and total applied overhead; it is the amount of underapplied or overapplied overhead

## total variance

the difference between total actual cost incurred
and total standard cost for the output produced during
the period

the difference between budgeted variable overhead based on actual input activity and variable overhead applied to production

the difference between total actual variable overhead and the budgeted amount of variable overhead based on actual input activity

## variance analysis

the process of categorizing the nature (favorable or unfavorable) of the differences between standard and actual costs and determining the reasons for those differences

## volume variance

a fixed overhead variance that represents
the difference between budgeted fixed overhead and fixed
overhead applied to production of the period; is also referred
to as the noncontrollable variance

## Covariance

A measure of the degree to which returns on two assets move in
tandem. A positive covariance means that asset returns move together; a
negative covariance means they vary inversely.

## Direct materials mix variance

The variance between the budgeted and actual mixes of
direct materials costs, both using the actual total quantity used. This variance isolates
the unit cost of each item, excluding all other variables.

## Labor efficiency variance

The difference between the amount of time that was budgeted
to be used by the direct labor staff and the amount actually used, multiplied
by the standard labor rate per hour.

## Labor rate variance

The difference between the actual and standard direct labor rates
actually paid to the direct labor staff, multiplied by the number of actual hours
worked.

## Materials price variance

The difference between the actual and budgeted cost to
acquire materials, multiplied by the total number of units purchased.

## Materials quantity variance

The difference between the actual and budgeted quantities
of material used in the production process, multiplied by the standard cost per
unit.

## Production yield variance

The difference between the actual and budgeted proportions
of product resulting from a production process, multiplied by the standard unit cost.

## Selling price variance

The difference between the actual and budgeted selling price for
a product, multiplied by the actual number of units sold.

## Standard cost

A predetermined cost that is based on original engineering designs and
production methodologies. It is frequently used to determine the degree of additional
actual costs incurred above the standard rates.

## Standard & Poorâ€™s Composite Index

Index of the investment performance of a portfolio of 500 large stocks. Also called the
S&P 500.

## Gold Standard

A fixed exchange rate system in which a currency is directly convertible into gold.

## Contract Work Hours and Safety Standards Act

A federal Act requiring federal contractors to pay overtime for hours worked exceeding 40 per week.

## Fair Labor Standards Act of 1938

A federal Act creating standards of overtime
pay, minimum wages, and payroll recordkeeping.

## Part standardization

The planned reduction of similar parts through the standardization
of parts among multiple products.

## Standard containers

Common-sized containers that are used to efficiently move,
store, and count inventory.

## Correlation coefficient

A standardized statistical measure of the dependence of two random variables,
defined as the covariance divided by the standard deviations of two variables.