Stack Overflow for Teams — Collaborate and share knowledge with a private group. Create a free Team What is Teams? Learn more. Weighted average vs "unweighted" average in probability Ask Question. Asked 5 years, 7 months ago. Active 2 months ago. Viewed 16k times. Thanks, Norbert. Improve this question. StasK Add a comment. Active Oldest Votes. Improve this answer. Two shops: A and B, in A there are two customers, one happy, in B, there were and 75 were happy.
That's a baseline for a new shop when it enters the market, and can be used to compare itself against it. Am I above or below the average performance of other shops? If there was only two customers, it might have happened by chance that they were happy -- 75 happy within customers is much more likely to happen by chance. Mat Mat 1 1 1 bronze badge.
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Free Investment Banking Course. Login details for this Free course will be emailed to you. Email ID. Contact No. The average is the summation of the observations given in the sample and dividing that summation by several observations in the sample.
A weighted average is the type of average in which every observation in the given set of data will be assigned weight before the summation to a sole average value. In a weighted average, each observation has a frequency assigned to it or a specific weight. There are no specific conditions where the simple average has to be applied. Still, however, if other conditions are met, then other averages are appropriate to use as a weighted average, moving average, etc.
The reason to use a weighted average instead of a simple average is when one wants to calculate an average which will be based on different or various percentage values for many categories.
The second case will be when one has a group of observations where each will have a frequency associated along with it. You can compute a weighted average by multiplying its relative proportion or percentage by its value in sequence and adding those sums together. Technical Analysis Basic Education. Fundamental Analysis. Financial Ratios. US Markets. Tools for Fundamental Analysis. Your Privacy Rights. To change or withdraw your consent choices for Investopedia.
At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data. We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. What Is a Weighted Average? Key Takeaways The weighted average takes into account the relative importance or frequency of some factors in a data set.
A weighted average is sometimes more accurate than a simple average. Stock investors use a weighted average to track the cost basis of shares bought at varying times. How does a weighted average differ from a simple average? What are some examples of weighted averages used in finance? How is a weighted average calculated? Compare Accounts.
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