OK so while maybe not a complete advanced topic it may be unfamiliar to many, so let’s code this Advanced Analysis as a refresher that we’re going to use in the future to build on.
Standard deviation
Below you will see a nice graph of a bell shaped curve that attempts to depict basically a broad estimate within a certainty of an outcome.
Said in a much simpler way and by example… on June 1st in Dallas TX … there’s a 95% chance that the temperature will be between 90 and 110, and on average over longer periods of time, this deviation will be somewhat normal… this makes the graph even on both sides.
The only reason that you want to know this is so that when the result we are measuring greatly varies from this temperature one can infer how unusual it is.
By M. W. Toews – Own work, based (in concept) on figure by Jeremy Kemp, on 2005-02-09, CC BY 2.5, https://commons.wikimedia.org/w/index.php?curid=1903871
Two standard deviations is the very most common and represents a probability of 95%!
There you have it .. likely the simplest advanced analysis topic that we’ve had and a refresher for many, but again this brings us up to date for some items that we can build on soon with more to come in advanced analysis topics
Have a Great “Standard Deviation Refresher/Advanced Analysis” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
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