One of the simplest ways to summarize data is a frequency distribution, which is a tabular display of data summarized into relatively small numbers of intervals. Rates of returns are fundamental units for investment decisions. Frequency distributions help summarize returns.
The following are the steps to constructing a frequency distribution:
Once establishing a frequency distribution, you can compute three other useful ways to compute the data, which are
Relative Frequency is the absolute frequency of an interval/total number of observations;
Cumulative Frequency consequently adds the number of observations from the first to the last interval;
Cumulative Relative Frequency consequently adds the relative frequency to show the percentage of observations at a certain point
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