answersLogoWhite

0


Best Answer

The purpose of obtaining the standard deviation is to measure the dispersion data has from the mean. Data sets can be widely dispersed, or narrowly dispersed. The standard deviation measures the degree of dispersion. Each standard deviation has a percentage probability that a single datum will fall within that distance from the mean.

One standard deviation of a normal distribution contains 66.67% of all data in a particular data set. Therefore, any single datum in the data has a 66.67% chance of falling within one standard deviation from the mean. 95% of all data in the data set will fall within two standard deviations of the mean. So, how does this help us in the real world? Well, I will use the world of finance/investments to illustrate real world application.

In finance, we use the standard deviation and variance to measure risk of a particular investment. Assume the mean is 15%. That would indicate that we expect to earn a 15% return on an investment. However, we never earn what we expect, so we use the standard deviation to measure the likelihood the expected return will fall away from that expected return (or mean). If the standard deviation is 2%, we have a 66.67% chance the return will actually be between 13% and 17%. We expect a 95% chance that the return on the investment will yield an 11% to 19% return. The larger the standard deviation, the greater the risk involved with a particular investment. That is a real world example of how we use the standard deviation to measure risk, and expected return on an investment.

User Avatar

Wiki User

โˆ™ 2010-10-18 00:46:14
This answer is:
User Avatar
Study guides

Statistics

20 cards

What are the brain's association areas

What is a field hockey stick made of

How old is she is rebecca stevenson

When during pregnancy should one quit smoking

โžก๏ธ
See all cards
3.96
โ˜†โ˜…โ˜†โ˜…โ˜†โ˜…โ˜†โ˜…โ˜†โ˜…
26 Reviews

Add your answer:

Earn +20 pts
Q: What is the purpose of finding the standard deviation of a data set?
Write your answer...
Submit
Still have questions?
magnify glass
imp
Continue Learning about Statistics

What is the purpose of finding standard deviation?

The standard deviation of a set of data is a measure of the random variability present in the data. Given any two sets of data it is extremely unlikely that their means will be exactly the same. The standard deviation is used to determine whether the difference between the means of the two data sets is something that could happen purely by chance (ie is reasonable) or not.Also, if you wish to take samples of a population, then the inherent variability - as measured by the standard deviation - is a useful measure to help determine the optimum sample size.


What does one standard deviation mean?

Standard deviation is a measure of variation from the mean of a data set. 1 standard deviation from the mean (which is usually + and - from mean) contains 68% of the data.


What is the relationship between standard deviation and variance for the same sample data?

The standard deviation is the square root of the variance.


In research how to define standard deviation?

Standard deviation shows how much variation there is from the "average" (mean). A low standard deviation indicates that the data points tend to be very close to the mean, whereas high standard deviation indicates that the data are spread out over a large range of values.


Does the size of the standard deviation of a data set depend on where the center is?

Yes it does. The center, which is the mean, affects the standard deviation in a potisive way. The higher the mean is, the bigger the standard deviation.

Related questions

What is the essence of finding the standard deviation of your data?

I am not entirely sure I understand correctly what you mean by "essence". However, the idea of finding the standard deviation is to determine, as a general tendency, whether most data points are close to the average, or whether there is a large spread in the data. The standard deviation means, more or less, "How far is the typical data point from the average?"


What is the purpose of finding standard deviation?

The standard deviation of a set of data is a measure of the random variability present in the data. Given any two sets of data it is extremely unlikely that their means will be exactly the same. The standard deviation is used to determine whether the difference between the means of the two data sets is something that could happen purely by chance (ie is reasonable) or not.Also, if you wish to take samples of a population, then the inherent variability - as measured by the standard deviation - is a useful measure to help determine the optimum sample size.


What is standard deviation used for?

Standard deviation is a measure of the spread of data.


What are the uses of standard deviation?

The standard deviation is a measure of the spread of data.


If the standard deviation is small the data is more dispersed?

No, if the standard deviation is small the data is less dispersed.


What does one standard deviation mean?

Standard deviation is a measure of variation from the mean of a data set. 1 standard deviation from the mean (which is usually + and - from mean) contains 68% of the data.


Relation between mean and standard deviation?

Standard deviation is the variance from the mean of the data.


Does variance and standard deviation assume nominal data?

No. Variance and standard deviation are dependent on, but calculated irrespective of the data. You do, of course, have to have some variation, otherwise, the variance and standard deviation will be zero.


What are the units of measurement of standard deviation?

Standard deviation has the same unit as the data set unit.


What does a standard deviation of 0 tell you?

The smaller the standard deviation, the closer together the data is. A standard deviation of 0 tells you that every number is the same.


What a large standard deviation means?

A large standard deviation means that the data were spread out. It is relative whether or not you consider a standard deviation to be "large" or not, but a larger standard deviation always means that the data is more spread out than a smaller one. For example, if the mean was 60, and the standard deviation was 1, then this is a small standard deviation. The data is not spread out and a score of 74 or 43 would be highly unlikely, almost impossible. However, if the mean was 60 and the standard deviation was 20, then this would be a large standard deviation. The data is spread out more and a score of 74 or 43 wouldn't be odd or unusual at all.


Does a zero standard deviation support data?

no

People also asked