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How can you increase mean without increasing standard deviation of a portfolio?

How can you increase mean without increasing standard deviation of a portfolio?

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Answer #1

Hello Sir/ Mam

Mean refers to the average value of the sample while standard deviation indicates the average deviation of the values from its mean.

Hence, to keep the average deviation constant while increasing the average value, we can increase each item of the population with a constant. In this way, mean will get increased without increasing standard deviation.

Lets say we have a mean of 5 and S.D. of 10 with n = 50.

Now, if we increase each item by x.

New mean will be 5+x whilst S.D. will still be 10.

I hope this solves your doubt.

Feel free to comment if you still have any query or need something else. I'll help asap.

Do give a thumbs up if you find this helpful.

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