Volatility Primer 3: The Normal Distribution

The random variation of monthly or annual asset returns conform to a probability distribution known as the normal (Gaussian) distribution or bell curve. The probability distribution for the asset is described by its average return, or mean, and its volatility, or standard deviation. Standard deviation is the square root of the average of the squared deviations from their average value and is a measure of the dispersion of the data. A low standard deviation means the data is