1744 WordsApr 7, 20157 Pages

Standard Deviation use in the Business World
Abstract
This paper evaluates the role of standard deviation in business. As part of the evaluation, a brief summary of five different peer reviewed papers has been presented. Topics such as, the purpose of the study, the research questions, the hypothesis of the study, and the main findings of the study for the five papers, have been summarized by each of the learning team members.
Standard Deviation use in the Business World
Standard Deviation is a statistical measurement that shows how data are spread above and below the mean. The square root of the variance is the standard deviation (Cleaves, Hobbs, & Noble, 2012). It plays a key role in business management, with one of its*…show more content…*

3. Is the delayed reaction to bad news a manifestation of their lower degree of earnings persistence?
Hypothesis
The hypothesis is that good news announcements are associated with positive returns and bad news is associated with negative returns. Announcements of bad news have generally been established to have lower earnings response coefficients. The conditions of changing volatility, the ISD of an at-the-money option can be interpreted as an estimate of the expected standard deviation of the return over the life of that option, and can therefore be used to analyze the pattern of volatility, which the market expects to occur around an announcement. Announcements of earnings per share (eps) figures with a high transitory component, whose implications for the future are more difficult to assess, should be associated with a delayed volatility reaction.
Findings of the study
1. If the day of the of the anticipated volatility increase is known, then by measuring the ISD at two points before that day, the `basic' volatility and the amount increase can be deduced.
2. The ISDs tend to rise before the announcement date and fall after it. The day 10 ISDs suggest that volatility rises again roughly two weeks after the announcement.
3. Announcing bad news and announcing news that is difficult to interpret both have an incremental effect on delaying the volatility reaction, but the effect of bad news appeared to be dominant.
4.

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