Misused Range - Stock Market

Range

1. Easy to calculate
2. Easy to understand
3. Generally not looked upon as a very useful measure of location

Note: it is based on extreme values

1. Quality control…. When a quick look of variation and location without high accuracy, range is useful
2. When sample size is small range is quite adequate

A misused range can be found in stock market – look at high and low for the year
range tells you nothing about where the stock spends most of its time (think 52 week high, low)

Characteristics of the standard deviation:

1. Based on every value of data
2. Measured from the mean
3. Mathematically logical because it doesn’t neglect the negative and positive signs of individual deviations
4. A. when each value of given data is increased or decreased by a fixed number the standard deviation is not effected

B. if the data becomes multiplied or divided by a fixed number, the standard deviation is also divided by that same fixed number

(this can help by reducing very large number simply and then multiplying it back in)

Comments on std dev

• Unit of measure for dispersion

z-scores, z-factor, standardized variables

1. Important to use z scores when preparing different kinds of measurements
2. Any variable divided by the standard deviation is said to be standardized

Take any variable and divide it by a dispersion and you have a standardized dispersion?

Relative dispersion is an absolute dispersion divided by an average

If the actual variation dispersion is a stnd dev – it is called an absolute dis

When the asset dispersion is stnd dev divided by mean it is a coefficient variation

1. CV is independent of units
2. Useful in comparing distributions that might be expressed in different units
3. Useful when comparing values measured in the same units where one is for example 10 ft, other 1000ft (same units except has greater magnitude)

PROBABILITY

Probability is greatly aided by set theory

Sets are nothing more than a collection of items or objects(set of females or males, cpus, chairs)

When you have a set of data – you can calculate probability