Variance, Mathematics

Variance

Consider the example of investment opportunities. The expected gains were Rs.114 and Rs.81 respectively. The fact is that an investor also looks at the dispersion before coming to a decision.

501_variance.png

The dispersion of opportunity 1 is far greater than that of opportunity 2. This might alarm the investor.

In this example, it might be worthwhile to compute the coefficient of variation.

For opportunity 1, this works out to be

= (42/114) x 100 = 36.84%

For opportunity 2, this works out to be

= (29.14/81) x 100  = 35.97%

The investor may regard both opportunities homogeneous in this regard and therefore find opportunity 1 more attractive (because of the higher expected returns).

 

Posted Date: 9/15/2012 1:22:04 AM | Location : United States







Related Discussions:- Variance, Assignment Help, Ask Question on Variance, Get Answer, Expert's Help, Variance Discussions

Write discussion on Variance
Your posts are moderated
Related Questions

Proof of the Derivative of a Constant : d(c)/dx = 0 It is very easy to prove by using the definition of the derivative therefore define, f(x) = c and the utilize the definiti

For the layman, a "function" indicates a relationship among objects. A function provides a model to describe a system. Economists refer to deman


what is the expiremental probability that the next toss and spin will result in 3 and tail if 1-heads,53.2-heads,49.3-heads,54.1-tail,65.2-tails,71.3-tails,62

Discuss comparative statics,Market model and Nationa income model


Retail price index This is weighted average of price relatives based on an average household in the base year. The items consumed are divided into groups as liker food, transp

Data entry is performed in 2-person teams. Each 2-person team can enter 520 surveys per day. A selection of 7540 surveys must be entered by day''s end. How many total employees, wo

Solve 4 sin 2 ( t ) - 3 sin ( t /3)= 1 . Solution Before solving this equation let's solve clearly unrelated equation. 4x 2 - 3x = 1  ⇒ 4x 2 - 3x -1 = ( 4x + 1) ( x