Median

Definition

The median is the middle value in a data set when the numbers are arranged in ascending or descending order. In finance, it is used to find the central tendency of a dataset and mitigate the impact of outliers.

5 Must Know Facts For Your Next Test

1. The median divides a data set into two equal halves.
2. If the number of observations is even, the median is calculated as the average of the two middle numbers.
3. The median is less affected by extreme values or outliers compared to the mean.
4. In finance, the median can provide a more accurate representation of typical values, especially in skewed distributions.
5. Calculating the median requires first arranging the data set in numerical order.

Review Questions

• How do you determine the median if you have an odd number of observations?
• Why might a financial analyst prefer using the median over the mean?
• What steps are involved in calculating the median for an even number of observations?

Related terms

Mean:

The arithmetic average of a set of numbers, calculated by summing all values and dividing by their count.

Mode:

The value that appears most frequently in a data set.

Standard Deviation:

A measure that quantifies the amount of variation or dispersion in a set of data values.