MAF101 Lecture Notes - Lecture 6: Kik, Weighted Arithmetic Mean, Expected Return
Document Summary
The difference between the smallest and largest possible return; but may be distorted by extreme values (outliers) Take the difference between possible return and expected return, then sum up and take the average. Problem = the positive and negative values cancel each other out. Same as average deviation but takes the absolute values of the differences (removing the positive/negative problem). Problem = does(cid:374)(cid:859)t p(cid:396)o(cid:448)ide a(cid:374) i(cid:374)di(cid:272)atio(cid:374) of ho(cid:449) sp(cid:396)ead out the differences are though. Takes the average of the squared differences from the mean. Squaring removes the impact of negative data points, and gives an indication of how spread out the data is (weights data from the mean more heavily). Problem = squaring means its no longer in the same unit of measurement as the original data, so we have to take the square root of the variance to get the standard deviation n t k. 2 k n standard deviation for entire population k.
