standard deviation

A measure of the degree to which returns of an asset vary, either to the upside or the downside, from their average over the period measured. Higher standard deviations indicate higher risk. Although standard deviation gives a better indication of volatility than a simple average return, AAII founder James Cloonan argued in “Investing at Level3” that it is an insufficient risk measure for the long-term investor. He advocated instead looking at historical occurrences of pullbacks and the time to recovery for a clearer picture.