If the dice-throwing distribution were normally
distributed (a classic "bell curve"),
a standard deviation of 2.415 would indicate the
following
- 38.3% of all returns are
within one-half standard deviation of the expected
return -- in our example, from $5.793 to $8.207
(within $1.207 of $7.00)
- 68.3% of all returns are
within one standard deviation of the average
return -- in our example, from $4.585 to $9.415
(within $2.415 of $7.00)
- 95.4% of the returns are
within two standard deviations of the average
return -- in our example, from range from $2.170
to $11.830 (within $4.830 of $7.00)
The larger the standard deviation, the greater
the dispersion and the greater the risk. In our
example of the weird dice with only 3s and 4s,
the standard deviation is 0.707. |
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2.2.3 Standard Deviation
