- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 3. Statistical Measures of Asset Returns
- Subject 2. Measures of Dispersion
CFA Practice Question
Which of the following is incorrect?
A. The sum of deviations from the mean always equals zero.
B. For a sample, the mean absolute deviation can never be equal to the standard deviation.
C. A t-distribution does not have a finite standard deviation.
Explanation: Mean absolute deviation will be equal to standard deviation for a sample with an equal number of two discrete values (all deviations of equal magnitude, half positive and half negative). In other situations standard deviation will exceed mean absolute deviation.
User Contributed Comments 4
| User | Comment |
|---|---|
| czar | why? |
| toyo | Could anyone show example? |
| simonbenfrech | Example: 4 observations and Standard deviation computed as a population(n) one and not a sample one (n-1) 10,10,0,0 Mean =20/4 = 5 MAD = (5+5+5+5)/4= 5 VARIANCE = (25 *4)/4 = 100/4= 25 Std.Dev = 25^(0.5) = 5 CQFD MAD = Std. Dev |
| Vlz2103 | When all the numbers of a distribution are the same all measures of variance are 0...although simon's example is better lol. |