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Standard deviation

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Definition of Standard deviation

Standard Deviation Image 1

Standard deviation

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


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.


standard deviation

the measure of variability of data around
the average (or mean) value of the data


Standard deviation

A measure of the variation in a distribution, equal to the
square root of the arithmetic mean of the squares of the deviations from the
arithmetic mean; the square root of the variance.


standard deviation

Square root of variance. Another measure of volatility.



Related Terms:

Black-Scholes option-pricing model

A model for pricing call options based on arbitrage arguments that uses
the stock price, the exercise price, the risk-free interest rate, the time to expiration, and the standard deviation
of the stock return.



Bollinger band chart

A financial chart that plots actual asset data along
with three other bands of data: the upper band is two standard deviations
above a user-specified moving average; the lower band is two standard
deviations below that moving average; and the middle band is the moving
average itself.


coefficient of variation

a measure of risk used when the standard deviations for multiple projects are approximately
the same but the expected values are significantly different


Standard Deviation Image 2

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.


Opportunity set

The possible expected return and standard deviation pairs of all portfolios that can be
constructed from a given set of assets.


Portfolio opportunity set

The expected return/standard deviation pairs of all portfolios that can be
constructed from a given set of assets.


Reward-to-volatility ratio

Ratio of excess return to portfolio standard deviation.


Risk

Typically defined as the standard deviation of the return on total investment. Degree of uncertainty of
return on an asset.


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.


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.


Variance

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


Standard Deviation Image 3

Volatility

A measure of risk based on the standard deviation of investment fund performance over 3 years.
Scale is 1-9; higher rating indicates higher risk. Also, the standard deviation of changes in the logarithm of an
asset price, expressed as a yearly rate. Also, volatility is a variable that appears in option pricing formulas. In
the option pricing formula, it denotes the volatility of the underlying asset return from now to the expiration
of the option.
Std deviation = Rating
up to 7.99 = 1
8.00-10.99 = 2
11.00-13.99 = 3
14.00-16.99 = 4
17.00-19.99 = 5
20.00-22.99 = 6
23.00-25.99 = 7
26.00-28.99 = 8
29.00 and up = 9


Volatility

a. Another general term for sensitivity. b. The standard deviation
of the annualized continuously compounded rate of return of an asset. c. A
measure of uncertainty or risk.



volatility

A measure of the amount of change in the daily price of a security over a specified period of time. It is Uusually given as the standard deviation of the daily price changes of that security on an annual basis.


Z score

Statistical measure that quantifies the distance (measured in standard deviations) a data point is from
the mean of a data set. Separately, z score is the output from a credit-strength test that gauges the likelihood of
bankruptcy.


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.


Contract Work Hours and Safety Standards Act

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


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


Fair Labor Standards Act of 1938

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


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.



Gold Standard

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


ideal standard

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


Part standardization

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


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 containers

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


standard cost

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


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 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 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.


Standard error

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


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


standard overhead application rate

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 & Poor’s Composite Index

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


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


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.


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.


Appraisal ratio

The signal-to-noise ratio of an analyst's forecasts. The ratio of alpha to residual standard
deviation.


Efficient portfolio

A portfolio that provides the greatest expected return for a given level of risk (i.e. standard
deviation), or equivalently, the lowest risk for a given expected return.
Efficient set Graph representing a set of portfolios that maximize expected return at each level of portfolio
risk.



 

 

 

 

 

 

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