Premium Calculation: Why Standard Deviation Should be Replaced by Absolute Deviation

Standard deviation, standard error. Which 'standard' should we use?

Standard deviation (SD) and standard error (SE) are quietly but extensively used in biomedical publications. These terms and notations are used as descriptive statistics (summarizing numerical data), and they are used as inferential statistics (estimating population parameters from samples). I review the use and misuse of SD and SE in several authoritative medical journals and make suggestions ...

Detecting outliers: Do not use standard deviation around the mean, use absolute deviation around the median

Analysis of least absolute deviation

The least absolute deviation or L1 method is a widely known alternative to the classical least squares or L2 method for statistical analysis of linear regression models. Instead of minimizing the sum of squared errors, it minimizes the sum of absolute values of errors. Despite its long history and many ground-breaking works (cf. Portnoy and Koenker (1997) and references therein), the former has...

MULTIPERIOD CREDIBILITIC MEAN SEMI-ABSOLUTE DEVIATION PORTFOLIO SELECTION

In this paper, we discuss a multiperiod portfolio selection problem with fuzzy returns. We present a new credibilitic multiperiod mean semi- absolute deviation portfolio selection with some real factors including transaction costs, borrowing constraints, entropy constraints, threshold constraints and risk control. In the proposed model, we quantify the investment return and risk associated with...

Particle Size and Standard Deviation

Why process at all? Of course, the answer is ultimately feed efficiency, producing the most milk, eggs, meat or fiber at the lowest possible cost. Particle size reduction as the first step in the feed manufacturing process works toward the goal of improved feed efficiency by increasing the surface area of the materials being processed. This increases the amount of materials exposed to the anima...