|
|
Article: Investments - Seeing The Blind Spot: The measurement of standard deviation does not discriminate between upside and downside volatility.
- Article from:
- Financial Planning
- Article date:
- August 1, 2000
- Author:
CopyrightCOPYRIGHT 2000 SourceMedia, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
|
It's common to use standard deviation of return as a measure of mutual fund risk. Very simply, if two funds have a similar standard deviation of return, they are assumed to have comparable risk. Standard deviation measures the amount of volatility in the historical returns of a mutual fund (or stock, etc.). The standard deviation of return provides a sense of how much "spread" exists in the year-to-year returns that make up the three-year average annual return, five-year average annual return, 10-year average annual return, and so on. The larger the standard deviation of return, the greater the spread of returnsboth up and downaround the mean.
While it is ...