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Standard Deviation and Probability

Standard Deviation and Probability - mean 2 What shape...

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1. Why is the standard deviation less than the mathematical average?  The mathematical average is the average of many observations. The standard deviation is a  measurement of spread used to show how varied the observations are in relation to the mean. Example If you are looking at men’s height, and the average is 5'10, the standard deviation would  mostly likely be about an inch. The standard deviation cannot be 6'0, or 1'0, unless there is an  error in one of your calculations. If you take into account the equation for the standard  deviation, you will notice that it is impossible to get a standard deviation larger than the 
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Unformatted text preview: mean. 2. What shape would the probability distribution be for a certain return? What shape would the probability distribution be for an uncertain return? The probability distribution curve for a completely certain return would be a straight line, since there is no variability in the returns. The shape of the probability distribution curve for a set of completely uncertain return would be a horizontal line, since there is infinite variability of returns....
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