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Intermediate
Z-score is a statistical term showing the number of standard deviations above or below the mean the data point sits, relative to the set of data being tested.
Mathematically it is the raw data point (observation) minus the mean, then divided by the standard devation.
The Z-score is typically used when the population mean and standard deviations are known. Because this isn't usually practical, sample measures are used when sample sizes are large.
In cases where sample sizes are small then the Student's t-statistic is preferred.
Synonyms: standard score, standardize, z-value, normal score, standardized value
Sam: If the Zed-score requires a known
population, why is it so common in Finance?
Leo: To translate. I think our friend from
Canada meant to say
Z-score .
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