What does 'Decile' mean
A decile is a method of splitting up a set of ranked data into 10 equally large subsections. This type of data ranking is performed as part of many academic and statistical studies in the finance field. The data may be ranked from largest to smallest values, or vice versa.
BREAKING DOWN 'Decile'
In descriptive statistics, a decile is used to categorize large data sets from highest to lowest values, or vice versa. Like the quartile and the percentile, a decile is a form of a quantile which divides a set of observations into samples that are easier to analyze and measure. While quartiles are three data points that divide an observation into four equal groups or quarters, a decile consists of nine data points that divide a data set into ten equal parts. When an analyst or statistician ranks data and then splits them into deciles, s/he does so in an attempt to discover the largest and smallest values by a given metric. For example, by splitting the entire S&P 500 Index into deciles (50 firms in each decile) using the P/E multiple, the analyst will discover the companies with the highest and lowest P/E valuations in the index.
A decile is usually used to assign decile ranks to a data set. A decile rank arranges the data in order from lowest to highest, and is done on a scale of one to ten where each successive number corresponds to an increase of 10 percentage points. In other words, there are 9 decile points. The 1^{st} decile, or D1, is the point which has 10% of the observations below it, D2 has 20% of the observations below it, D3 has 30% of the observations falling below it, and so on.
There is no one way of calculating a decile, however, it is important that you are consistent with whatever formula you decide to use to calculate a decile. One simple calculation of a decile is:
D1 = value of [(n + 1)/10]^{th} data
D2 = value of [2(n + 1)/10]^{th} data
D3 = value of [3(n + 1)/10]^{th} data
.
.
.
D9 = value of [9(n + 1)/10]^{th} data
From this formula, it is given that the 5^{th} decile is the median, since 5(n+1)/10 is the data point that represents the halfway point of the distribution.
The table below shows the ungrouped scores (out of 100) for 30 exam takers:
48 
52 
55 
57 
58 
60 
61 
64 
65 
66 
69 
72 
73 
75 
76 
78 
81 
82 
84 
87 
88 
90 
91 
92 
93 
94 
95 
96 
97 
99 
Â
Using the information presented in the table, the 1^{st} decile can be calculated as:
= Value of [(30 + 1)/10]^{th} data
= Value of 3.1^{st} data, which is 0.1^{st} of the way between scores 55 and 57
= 55 + 2(0.1) = 55.2 = D1
D1 means that 10% of the data set falls below 55.2.
Â
Letâ€™s calculate the 3^{rd} decile:
D3 = Value of 3(30 + 1)/10
D3 = Value of 9.3^{rd} position, which is 0.3between the scores of 65% and 66%
Therefore, D3 = 65 + 1(0.3) = 65.3.
30% of the thirty scores in the observation falls below 65.3%.
Â
What would we get if we were to calculate the 5^{th} Decile?
D5 = Value of 5(30 + 1)/10
D5 = Value of 15.5^{th} position, halfway between scores 76 and 78
D5 is 77.
Also, notice how the 5^{th} decile is also the median of the observation. Looking at the data set in the table, the median, which is the middle data point of any given set of numbers, can be calculated as (76 + 78)/2 = 77 = median = D5. At this point half of the scores lie above and below the distribution.
Deciles are used in the investments field to assess the performance of a portfolio or a group of mutual funds. The decile rank acts as a comparative number which measures the performance of an asset against similar assets. For example, say an analyst is evaluating the performance of a set of mutual funds over time, a mutual fund that is ranked 5 on a decile scale of 1 to 10 means itâ€™s in the top 50%. By splitting the mutual funds into deciles, the analyst can review the best and worst performing mutual funds for a given time period, arranged from the smallest to highest average return on investment.
The government also uses deciles to determine the level of income inequality in the country, that is, how income is distributed. For example, if the top 20 wage earners of a country of 50,000 citizens fall in the 10^{th} decile and earn more than 50% of the total income in the country, one can conclude that there is a very high degree of income inequality in that country. In this case, the government can introduce measures to decrease the wage gap, such as increasing the income tax of the rich and creating estate taxes to limit how much wealth can be passed on to beneficiaries as inheritance.
Â

Data Science
Data science is a field of Big Data that seeks to provide meaningful ... 
Average Return
The simple mathematical average of a series of returns generated ... 
Level 2 Assets
Level 2 assets are assets that do not have regular market pricing, ... 
Semideviation
A measure of dispersion for the values of a data set falling ... 
Section 12D1 Limit
A rule added to the Investment Company Act in 1964 to provide ... 
Reverse Stock Split
A reverse stock split is a corporate action in which a company ...

Investing
S&P 500 Could Fall 60%: Hussman
While historically high, fundamentals, cash distribution, and valuation are drastically slowing. 
Investing
Repeat After Me: Valuation Is Not a Catalyst!
Valuation is a powerful reasoning tool for asset allocation only if you've done the associated fundamental analysis. 
Financial Advisor
How Morningstar Rates and Ranks Mutual Funds
Find out how Morningstar ranks and rates investments, and why the Morningstar star system is so heavily influenced by modern portfolio theory (MPT). 
Insights
Second Debate: The Benefits of Mutually Assured Destruction
Despite recent headlines about the treatment of women, each candidate seemed to realize that this line of attack could only end in disaster, taking both of them down and benefiting neither. The ... 
Insights
'I'll Keep You in Suspense': The Third Debate
Both candidates made extravagant promises regarding the country's economic future. 
Investing
Quality Dividends With Currency Control
Here's an avenue for obtaining exU.S. dividends while reducing currency risk. 
Financial Advisor
Think You Can Stomach the Perfect Investment?
When it comes to investing, great longterm track records are not immune from pullbacks, but try telling that to any investor. 
Insights
4 Forces Behind Income Inequality in America
Twothirds of U.S. households saw their income decline or stay flat between 2005 and 2014. A McKinsey report has taken an innovative look at this demographic. 
Investing
5 Best Mutual Funds in a Rising Rate Environment
Find out which five mutual funds can provide the strongest portfolio hedges against the inevitable increase in longterm interest rates. 
Insights
Why Are the Top 1% Are 70% Richer Than The Bottom 90%? Ask the Fed
Does America have a middle class any more?

What happens to the value of a mutual fund when a stock splits?
Find out what happens to the value of a mutual fund when a stock in its portfolio splits, including how stock splits work ... Read Answer >> 
Does a stock split lead to the gapping up/down of the stock?
If a company splits its stock, there will be no gapping of the stock due to the split itself. A stock split does not materially ... Read Answer >> 
How do I use Excel to calculate a weighted average?
Learn about the calculation and interpretation of weighted averages, including how to compute a weighted average using Microsoft ... Read Answer >>