Z-value

Definition

A z-value, also known as a z-score, measures the number of standard deviations a data point is from the mean of a dataset. It is used to standardize scores on different scales and compare them directly.

5 Must Know Facts For Your Next Test

1. A positive z-value indicates a value above the mean, while a negative z-value indicates a value below the mean.
2. The formula for calculating a z-value is (X - μ) / σ, where X is the data point, μ is the mean, and σ is the standard deviation.
3. In finance, z-values can be used to assess investment risk by comparing returns to their historical averages.
4. A z-value of 0 signifies that the data point is exactly at the mean.
5. Z-values are crucial in hypothesis testing and confidence interval calculations.

Review Questions

• What does a negative z-value indicate about its relation to the mean?
• How do you calculate a z-value given a data point, mean, and standard deviation?
• Why are z-values important in assessing investment risk?

Related terms

Standard Deviation: A measure of the amount of variation or dispersion in a set of values.

Mean: The average of all numerical values in a dataset.

Hypothesis Testing: A statistical method used to determine if there is enough evidence to reject a null hypothesis.