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Why do you square the deviations to get the variance and then take the reverse action of taking the square root of the variance to return the variance to sigma?
Wiki User
∙ 12y ago
because of two things-
a) both positive and negative deviations mean something about the general variability of the data to the analyst, if you added them they'd cancel out, but squaring them results in positive numbers that add up.
b) a few larger deviations are much more significant than the many little ones, and squaring them gives them more weight.
Sigma, the square root of the variance, is a good pointer to how far away from the mean you are likely to be if you choose a datum at random. the probability of being such a number of sigmas away is easily looked up.
Wiki User
∙ 12y ago
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What does reciproctal mean?
An action in response or in return for another.
How are variance and standard deviation used as measures of risk for both a security and a portfolio?
Risk reflects the chance that the actual return on an investment may be very different than the expected return. One way to measure risk is to calculate the variance and standard deviation of the distribution of returns.Consider the probability distribution for the returns on stocks A and B provided below.StateProbabilityReturn onStock AReturn onStock B120%5%50%230%10%30%330%15%10%320%20%-10%The expected returns on stocks A and B were calculated on the Expected Return page. The expected return on Stock A was found to be 12.5% and the expected return on Stock B was found to be 20%.Given an asset's expected return, its variance can be calculated using the following equation:whereN = the number of states,pi = the probability of state i,Ri = the return on the stock in state i, andE[R] = the expected return on the stock.The standard deviation is calculated as the positive square root of the variance.Note: E[RA] = 12.5% and E[RB] = 20%Stock AStock B
The Sortino Ratio?
I've written before about the Sharpe Ratio, a measure of risk-adjusted returns for an asset or portfolio. The Sharpe ratio functions by dividing the difference between the returns of that asset or portfolio and the risk-free rate of return by the standard deviation of the returns from their mean. So it gives you an idea of the level of risk assumed to earn each marginal unit of return. The problem with using the Sharpe Ratio is that it assumes that all deviations from the mean are risky, and therefore bad. But often those deviations are upward movements. Why should an investment strategy by graded so sharply by the Sharpe Ratio for good performance? In the real world, investors don't usually mind upside deviations from the mean. Why would they? These were the questions on the mind of Frank Sortino when he developed what has been dubbed the Sortino Ratio. The ratio that bears his name is a modification of the Sharpe Ratio that only takes into account negative deviations and counts them as risk. To me, it always made a lot more sense not to include upside volatility from the equation because I rather like to see some upside volatility in my portfolios. With the Sortino Ratio only downside volatility is used as the denominator in the equation. So the way you calculate it is to divide the difference between the expected rate of return and the risk-free rate by the standard deviation of negative asset returns. (It can be a bit tricky the first time you try to do it. The positive deviations are set to values of zero during the standard deviation calculation in order to calculate downside deviation.) By using the Sortino Ratio instead of the Sharpe Ratio you’re not penalizing the investment manager or strategy for any upside volatility in the portfolio. And doesn’t that make a whole lot more sense?
What are synonyms and antonyms for revert?
Synonyms refer to words that have the same meaning while antonyms are words that have an opposite meaning. Synonyms for revert include return, reverse and retain while its antonyms are evolve or progress.
What happens if the IRR is greater than the required rate of return?
The IRR rule states that if the internal rate of return (IRR) on a project or investment is greater than the minimum required rate of return - the cost of capital - then the decision would generally be to go ahead with it. Conversely, if the IRR on a project or investment is lower than the cost of capital, then the best course of action may be to reject it.
All your games on action replay is gone why?
return your action replay & get another one return your action replay & get another one
Can a bank take you federal return without court action?
Can a bank take your federal return without court action
Is return a action word?
Yes
Is return a action verb?
Yes
Is will return an action verb phrase?
Yes
Does Owen return to Total Drama Action?
yes
Will Trent return to total drama action?
sorry but no
What does reciproctal mean?
An action in response or in return for another.
What is reverse diaspora?
Reverse diaspora refers to the movement of individuals or groups who were once part of a diaspora population back to their ancestral homeland or a new destination. This movement can be motivated by various factors such as economic opportunities, cultural connections, or personal reasons. Reverse diaspora can contribute to the exchange of knowledge, skills, and resources between different regions.
How are variance and standard deviation used as measures of risk for both a security and a portfolio?
Risk reflects the chance that the actual return on an investment may be very different than the expected return. One way to measure risk is to calculate the variance and standard deviation of the distribution of returns.Consider the probability distribution for the returns on stocks A and B provided below.StateProbabilityReturn onStock AReturn onStock B120%5%50%230%10%30%330%15%10%320%20%-10%The expected returns on stocks A and B were calculated on the Expected Return page. The expected return on Stock A was found to be 12.5% and the expected return on Stock B was found to be 20%.Given an asset's expected return, its variance can be calculated using the following equation:whereN = the number of states,pi = the probability of state i,Ri = the return on the stock in state i, andE[R] = the expected return on the stock.The standard deviation is calculated as the positive square root of the variance.Note: E[RA] = 12.5% and E[RB] = 20%Stock AStock B
How do you get value of a string in reverse order in c?
Assume C#, not C: Traditional way: public string Reverse(string s) { if (string.IsNullOrEmpty(s)) return s; // "" or null char[] characters = s.ToCharArray(); Array.Reverse(characters); return new string(characters); } or as an extension method: public static string Reverse(this string s) { if (s == "") return ""; char[] characters = s.ToCharArray(); Array.Reverse(characters); return new string(characters); } The differences of the 2 methods above is on the caller (how to use Reverse()), and they may co-exist: For example: string test = "abc"; string result1 = Reverse(test); // traditional way string result2 = test.Reverse(); // call the extension
Does Owen return in total drama action?
Yes he dose
