Deck 3 – Statistical Basics of Returns (

How is mean absolute deviation computed?

$MAD=\sum |x_i-\bar{x}|/n$

What is the population variance formula?

${\sigma }^2=\sum (x_i-\mu {)}^2/N$

How does the geometric mean differ from the arithmetic mean for returns?

It captures compound multi-period growth using $(1+R)$ products.

Why is the arithmetic mean the best estimate of the next single-period return?

It is the simple average of period returns.