In finance, standard deviation quantifies volatility: a higher value means returns are more spread out and less predictable. It is the risk measure in the Sharpe ratio and a building block of modern portfolio theory.
Formula
σ = √[ Σ (Returnᵢ − Mean Return)² ÷ N ]
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Example
A fund with average annual return 12% and standard deviation 15% typically ranges between −3% and +27% in a normal year.
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Relevant NISM series
CFANISM Series XV
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