-1

To calculate the annualized standard deviation from a monthly standard deviation, the common used method is to multiply it by sqrt(12).

I can´t understand this, as this annualized distribution is 12 times the monthly one, so its variance should be 144 (12^2) times the former one and thus its standard deviation should be multiplied just be 12.

What am I not getting?

Thank you very much!

flag
I don't think this looks like a research question, and research questions are what mathoverflow is for. One thing you're probably not getting is that you're adding 12 things for different months that are independent of each other, rather than simply multiplying something corresponding to one month by 12. – Michael Hardy Mar 10 2011 at 17:22

closed as too localized by J.C. Ottem, Zev Chonoles, Andres Caicedo, Qiaochu Yuan, Andreas Blass Mar 10 2011 at 17:58

Browse other questions tagged or ask your own question.