CFA CFA Level 1 MAD versus STD Dev

MAD versus STD Dev

  • This topic has 4 replies, 3 voices, and was last updated Aug-18 by scarebaer.
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  • scarebaer
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    This is more a purpose of use question than understanding of the concept. Has anyone every ran into or can give me an example when you would rather use MAD (mean abs deviation) rather than the standard deviation? As stated, in general the MAD will be less than the Std deviation of a population or sample. Just thinking about it conceptually the context of what you are looking at might be a worthwhile mention. If the context of measuring is around the mean than STD dev makes sense. But if the context is about the median, then maybe you use MAD?  

    googs1484
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    Well this is actually a good question that I have no answer too! I am sorry. I know why SD is typically larger but that’s not what you asked. Hopefully someone has a good explanation. I have a general idea but I do not want to come on here and talk out of my ***.

    Stuj79
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    Have a quick scan through this, may give you an idea of the differences and why each is considered in different circumstances.

    http://www.leeds.ac.uk/educol/documents/00003759.htm

    googs1484
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    Sounds like there is still a miniscule amount of controversy over which statistic is more reliable. I will just trust CFAI and go with SD 😉

    scarebaer
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    Thank you for the article @Stuj79

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