Mean, Median and Sample
The mean is the sum of the values divided by their count; the median is the middle value in a sorted series.
The mean is affected by extreme values. A sample is the group that was measured, and not necessarily the whole population. When site participants choose to participate voluntarily, that is not a representative sample. Popularity is not proof that a product is worth investing in.
For returns of 0%, 0%, 0%, 0%, 100%, the mean is 20% and the median is 0%. The single number “20%” does not tell the whole story.
Explain the example in your own words and check the calculation.
Bank of Israel · Financial Education ↗Check your understanding
For five values: 0,0,0,0,100 — what is the median?
- 20
- 0
- 100
Answer and explanation
0. The middle value after sorting is 0.
Most site participants chose stocks. What can you conclude?
- That this is necessarily the best investment
- That this is how the site respondents chose
- That this is how all citizens of the country chose
Answer and explanation
That this is how the site respondents chose. You can only describe the measured sample, without turning it into a recommendation.
Continue learning
Percentages: The Language of Money — A percent is a part out of one hundred.