The state of getting dispersed or spread across or throughout a range or spectrum. In statistics, dispersion refers to the extent to which numerical data (such as returns) is likely to vary about an average or central value (usually, the mean). The study and analysis of dispersion helps to infer an idea about the distribution of the data.
Dispersion is a statistical measure of the range of potential outcomes/ results for an activity, investment, asset (or broadly a financial element or item) based on its historical volatility or returns.
Dispersion is typically defined by means of dispersion risk, which is a type of risk (financial risk) that arises from the situation where an investment or asset has a dispersed range of possible returns. The wider the dispersed range, the riskier the investment/ asset is, and vice versa. Widely dispersed range implies a highly risky investment due to the so many possible results for the return on that investment. A narrowly dispersed range is an indication of fewer possible results for the return on the investment- therefore, it can be perceived as a safer or riskless investment.
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