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Standard Deviation

Analysts frequently measure dispersion of valuation error in terms of a standard deviation, a common statistical formula which measures how tightly these variances are clustered around the mean percentage error. If the distribution of an AVM’s valuation errors follows a normal bell-shaped curve, then roughly 68 percent of its value estimates will fall within plus or minus one standard deviation of the mean variance. A lower standard deviation indicates a tight concentration around the mean variance; an elevated standard deviation suggests that the model performs inconsistently.