Financial issues: loans, mortgage, investment

Although the inflation-adjusted long-term distributions show that prices spend much more time at lower levels, there is a tendency to consider the average price of a market as the midpoint between the highest and lowest prices. Using the gold example, the midpoint for 1979 to 1993 was $451. The average of all monthly prices will give a reasonable approximation of a normal price; however, the best measure is the median, or middle, value when all monthly prices are sorted from high to low. The median value for gold over the same period was $381. If we look back at earlier posts we find that skewness is measured as the difference between the mean and the median, as a percentage of the standard deviation. In this case, the difference of $70 is a very large value, indicating a distribution with a peak far to the left of center. For price distributions, the median is a much more useful value than the average, although not as convenient to calculate. The median naturally adjusts for the skewness in the price patterns.