Dispersion

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DEFINITION of 'Dispersion'

A statistical term describing the size of the range of values expected for a particular variable. In finance, dispersion is used both in studying the effects of investor and analyst beliefs on securities trading, and in the study of the variability of returns from a particular trading strategy or investment portfolio. It is often interpreted as a measure of the degree of uncertainty, and thus risk, associated with a particular security or investment portfolio.

INVESTOPEDIA EXPLAINS 'Dispersion'

For example, the familiar risk measurement, beta, measures the dispersion of a security's returns relative to a particular benchmark or market index. If the dispersion is greater than that of the benchmark, then the instrument is thought to be more risky than the benchmark. If the dispersion is less, then it is thought to be less risky than the benchmark.

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