Semideviation

AAA

DEFINITION of 'Semideviation'

A measure of dispersion for the values of a data set falling below the observed mean or target value. Semideviation is the square root of semivariance, which is found by averaging the deviations of observed values that have a result that is less than the mean. The formula for semideviation is as follows:

Semideviation



Where:
n = the total number of observations below the mean
rt = the observed value
average = the mean or target value of a data set

INVESTOPEDIA EXPLAINS 'Semideviation'

In portfolio theory, semideviation evaluates the fluctuations in returns below the mean. It provides an effective measure of downside risk for a portfolio. It's similar to standard deviation, but it only looks at periods where the portfolio's return was less than the target or average level. This allows investors to see how much loss can be expected from a portfolio, instead of only looking at its expected fluctuations.

RELATED TERMS
  1. Variance

    The spread between numbers in a data set, measuring Variance ...
  2. Standard Deviation

    1. A measure of the dispersion of a set of data from its mean. ...
  3. Optimization

    In the context of technical analysis, it is the process of adjusting ...
  4. Semivariance

    A measure of the dispersion of all observations that fall below ...
  5. Asset Allocation

    An investment strategy that aims to balance risk and reward by ...
  6. Volatility

    1. A statistical measure of the dispersion of returns for a given ...
Related Articles
  1. The Uses And Limits Of Volatility
    Markets

    The Uses And Limits Of Volatility

  2. Find The Highest Returns With The Sharpe ...
    Bonds & Fixed Income

    Find The Highest Returns With The Sharpe ...

  3. Using Historical Volatility To Gauge ...
    Markets

    Using Historical Volatility To Gauge ...

  4. An Introduction To Value at Risk (VAR)
    Options & Futures

    An Introduction To Value at Risk (VAR)

comments powered by Disqus
Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  3. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  4. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  5. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  6. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
Trading Center