Definition of 'Trimmed Mean'
The trimmed mean is calculated by first sorting the data set in ascending order. Then, the specified percentage of the highest and lowest values are removed from the data set. The mean of the remaining values is then calculated.
For example, if you are using a 5% trimmed mean, you would first sort the data set in ascending order. Then, you would remove the top 5% of the values and the bottom 5% of the values. The mean of the remaining values would then be calculated.
The trimmed mean is a more robust measure of central tendency than the mean, as it is less affected by outliers. However, the trimmed mean is also less precise than the mean, as it is based on a smaller sample size.
The trimmed mean is often used in financial analysis, as it can provide a more accurate representation of the central tendency of a data set that contains outliers.
Here are some additional points about the trimmed mean:
* The trimmed mean is also known as the Winsorized mean.
* The trimmed mean is a type of robust statistic.
* The trimmed mean is often used in place of the median when there are outliers in the data set.
* The trimmed mean is a more precise measure of central tendency than the median, as it is based on a larger sample size.
Do you have a trading or investing definition for our dictionary? Click the Create Definition link to add your own definition. You will earn 150 bonus reputation points for each definition that is accepted.
Is this definition wrong? Let us know by posting to the forum and we will correct it.