Page 53 - FINAL CFA SLIDES JUNE 2019 DAY 2

LOS 8.g: Calculate and interpret 1) a range Session Unit 2:
and a mean absolute deviation and 2) the 8. Statistical Concepts and Market Returns
variance and standard deviation of a
population and of a sample, p.144

Dispersion is defined as the variability around the central tendency. E.g. The range = maximum value – minimum value

Example: What is the range for the 5-year annualized total returns for five investment managers their
individual returns were 30%, 12%, 25%, 20%, and 23%?

Why |Absolute|? Because sum of actual is 0. Remember?

Example: What is the MAD

of the investment returns
for the five managers Meaning?
above? How is it

interpreted? On average, an individual
return will deviate ±4.8% from

the mean return of 22%.