Financial Jargon Buster Dictionary
This glossary is provided for information only and is not regulated by the Financial Services Authority.
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Standard Deviation
A statistical measure of the dispersion of a set of numbers around a central point. If the standard deviation is small, the frequency of distribution is concentrated within a narrow range of values. For a 'normal' distribution, about two thirds of the observations will fall within one standard deviation of the mean. Standard deviation is a commonly used measure of risk because the higher the standard deviation the higher the uncertainty of the return. As standard deviation measures the volatility of investment returns, it is an important measure of risk. Also known as Standard Error.
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