WFU Law School
Law & Valuation
2.2.3 Standard Deviation

2.2.4 Normal Distribution

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.

2.2.3 Standard Deviation

©2003 Professor Alan R. Palmiter

This page was last updated on: March 16, 2004