#Weighted standard deviation best book crack

#Weighted standard deviation best book crack

Are we taking a sledgehammer to crack a nut?.Standard deviaton: equal- or asset-weight.

Perhaps when we get a better understanding of the client's relevant questions, then we will have clarity and consensus around the right measures of risk and return. It favors the manager by minimizing dispersion.Р”Р‡rankly, this argument has also been used for equally weighting RETURN in the composite alas, this has not met with overwhelming support, as it should have. So the dispersion question is really this: 'What was the dispersion around the average ACCOUNT in the composite?' and not 'What was the dispersion around the average DOLLAR (Euro, Pound, etc.) in the composite?' It's clear that asset weighting reduces the dispersion in the composite and so it is not a conservative measure of dispersion risk. Client's ask about dispersion because their question is this: 'How likely am I to receive the average return of the composite?' Obviously, if dispersion among the portfolios in the composite is high, then there is a low likelihood that a new account will earn the return of the composite. I believe there is an even better reason to move from asset weighted to equal weighted standard deviation: it's a better answer to the right question. From there you just multiply each SD group by the duration of the day/night hours and take the mean. Stephen Campisi, Intuitive Performance Solutions Februat 12:38 PM To get your 24 hour 'weighted' SD, get the SD of all daytime values (we'll call that SDd) and the SD of your nighttime values (we'll call that SDn). It's easier to calculate, is more widely accepted, and is interpretable! It's more complex to derive and provides you with what benefit? And, why would using the beginning of the year market value for an annual measure improve upon the tried-and-true equal weighted standard deviation? I say, put an end to this measure and go with the traditional one. Is this a sign of a change in belief in the value of the asset-weighted approach? I believe it is, although firms can continue to show asset-weighted, if they would like.Р”В«ut why would you? How do you interpret or explain it? Equal-weighted standard deviation has an understood meaning, but asset-weighting, to my knowledge, doesn't. Other than in Q&As, we see nary a word on asset-weighting. Where did it go? The Handbook provides the math to derive the equal-weighted measure but not asset-weighted. Well, a funny thing happened when we went to the last edition of the Global Investment Performance Standards (GIPS(R)) in 2006: nowhere do we find the asset-weighted standard deviation. Way back in 1997, when the AIMR Performance Presentation Standards (AIMR-PPS(R)) introduced the requirement for firms to disclose a measure of dispersion, they encouraged firms to show asset-weighted standard deviation rather than equal-weighted, because, after all, the composite returns were asset-weighted, why shouldn't dispersion? AIMR introduced a formula to do just this. Let's address the subject of standard deviation, but not from a risk perspective, but rather as a dispersion measure.