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variance

Page history last edited by PBworks 15 years, 9 months ago

Variance

 

Is a way of measuring risk in Finance (when investing)

 

formula

 

VAR = 1/(T-1) * (return 1 - average return)^2 + (return 2 - average return)^2...(return T - average return)^2)

 

 

In words:

 

Its simple, you take each return, and subtract the average, and square the result...then, add them up. Divide the total by T-1.

 

To find the standard deviation, just take the square root of this number

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