| The standard deviation is an average from the average.
It is used throughout finance and statistics and useful to know. It helps describe a data set better than just the average as it tells you how far away from the average numbers are. If you heard of 6 Sigma, that the term used for 6 standard deviations from the mean or average value. What is a standard deviation? It is used to quantify the amount of variation or dispersion of a set of data values. In a normal distribution, it encompasses all points that are 68% from the mean or average. The =Stdev( ) function in Excel can be used to calculate it when you have a sample population. The term 2 standard deviations from the mean is also popular and incorporates 95% of a population 3 Standard deviations encompass 99% of a population. The standard deviation in finance is called Volatility and the greek lower case sigma σ represents it. See Also |