Z-Score

AAA

DEFINITION of 'Z-Score'

A Z-Score is a statistical measurement of a score's relationship to the mean in a group of scores. A Z-score of 0 means the score is the same as the mean. A Z-score can also be positive or negative, indicating whether it is above or below the mean and by how many standard deviations.

INVESTOPEDIA EXPLAINS 'Z-Score'

In addition to showing a score's relationship to the mean, the Z-score shows statisticians whether a score is typical or atypical for a particular data set. Z-scores also allow analysts to convert scores from different data sets into scores that can be accurately compared to each other. One real-life application of z-scores occurs in usability testing.

VIDEO

Loading the player...
RELATED TERMS
  1. Altman Z-Score

    The output of a credit-strength test that gauges a publicly traded ...
  2. Bankruptcy Abuse Prevention And ...

    Legislation enacted by President George W. Bush in 2005 that ...
  3. Chapter 11

    Named after the U.S. bankruptcy code 11, Chapter 11 is a form ...
  4. Bankruptcy Risk

    The possibility that a company will be unable to meet its debt ...
  5. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  6. Chapter 7

    A bankruptcy proceeding in which a company stops all operations ...
RELATED FAQS
  1. What is the variance/covariance matrix or parametric method in Value at Risk (VaR)?

    The parametric method, also known as the variance-covariance method, is a risk management technique for calculating the value ... Read Full Answer >>
  2. What is the difference between standard deviation and z score?

    Though the finance industry can be complex, an understanding of the calculation and interpretation of basic mathematical ... Read Full Answer >>
  3. How do you calculate GDP with the income approach?

    The income approach to measuring gross domestic product (GDP) is based on the accounting reality that all expenditures in ... Read Full Answer >>
  4. What is the difference between earnings and income?

    The differences between earnings and income change depending on the context. Technically speaking, personal earnings are ... Read Full Answer >>
  5. What is the formula for calculating beta?

    Beta is a measure used in fundamental analysis to determine the volatility of an asset or portfolio in relation to the overall ... Read Full Answer >>
  6. How can I use a regression to see the correlation between prices and interest rates?

    In statistics, regression analysis is a widely used technique to uncover relationships among variables and determine whether ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    What's a Z-Score?

    In statistics, Z-score refers to how many standard deviations a particular data point is from the mean of the data. A Z-score of 1 means the data point is one standard deviation from the mean. ...
  2. Markets

    How To Calculate A Z-Score

    Investors need to know how to detect signs of looming bankruptcy. The Z-score can help.
  3. Personal Finance

    Spotting Companies In Financial Distress

    What are the warning signs that a company is struggling - or worse, sinking - financially? Read on to find out.
  4. Bonds & Fixed Income

    An Overview Of Corporate Bankruptcy

    If a company files for bankruptcy, stockholders have the most to lose. Find out why.
  5. Bonds & Fixed Income

    Taking Advantage Of Corporate Decline

    A bankrupt company can provide great opportunities for savvy investors.
  6. Fundamental Analysis

    Explaining the Monte Carlo Simulation

    Monte Carlo simulation is an analysis done by running a number of different variables through a model in order to determine the different outcomes.
  7. Fundamental Analysis

    Explaining the Empirical Rule

    The empirical rule provides a quick estimate of the spread of data in a normal statistical distribution.
  8. Economics

    Explaining Demographics

    Demographics is the study and categorization of people based on factors such as income level, education, gender, race, age, and employment.
  9. Fundamental Analysis

    Calculating Degree of Financial Leverage

    Degree of financial leverage (DFL) is a metric that measures the sensitivity of a company’s operating income due to changes in its capital structure.
  10. Fundamental Analysis

    Calculating the Present Value of an Annuity

    The present value of an annuity is the current, lump sum value of periodic future payments as calculated using a specific rate.

You May Also Like

Hot Definitions
  1. Radner Equilibrium

    A theory suggesting that if economic decision makers have unlimited computational capacity for choice among strategies, then ...
  2. Inbound Cash Flow

    Any currency that a company or individual receives through conducting a transaction with another party. Inbound cash flow ...
  3. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  4. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  5. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  6. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!