Means and standard deviations

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Reference no: EM132234329

Means and Standard Deviations

What are your thoughts on why means and standard deviations of returns are often connected to expected returns and risk in returns?

As investing and business planning involve 0% Certainty, these two statistics are the closest over the long-run to accurately predict probabilities when trying to decide the risk levels of an investment or business decision.

Why use the mean and standard deviation? Why not other indicators?

The mean will give you the average of a range of numbers, which in plain English means an expected number to aim for, or plan on. The standard deviation is generally the closest indicator of true volatility of an event. The only other statistic that I am aware of that comes close to being a predictor statistic is the correlation coefficient.

What tools do you use, and for what purposes do you use them?

When setting prices in eBay and for Estate Sales I use the mean sales price (as opposed to asking price) over the past three months as often as possible to reflect true market value. These numbers come from both eBay’s sales tracking, as well as our own tracking and documentation in the Estate Sales. This generally creates a sales environment where the customer (eBay), the Client/Estate, and the purchaser (Estate Sales) feel they are getting the best price for the current time frame on any given item.

Required:

1. What are your thoughts on why means and standard deviations of returns are often connected to expected returns and risk in returns? Write 100 words

2. Why use the mean and standard deviation? Why not other indicators? Write 100 words

3. What tools do you use, and for what purposes do you use them? Write 50 words

Reference no: EM132234329

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