What Percentile is
In statistics, a percentile is a measure used to indicate the value below which a given percentage of observations in a group of observations falls. As an example, the 20th percentile is the value (or score) below which 20% of the observations may be found.
Steps for Calculating Percentiles:
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Rank the data in ascending order.
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Calculate the percentile rank of a given value. This is the percentage of values in the data set that are lower than the given value.
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Calculate the percentile score. This is the value from the data set that corresponds to the percentile rank.
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Calculate the percentile difference. This is the difference between the percentile rank and the percentile score.
Examples
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Percentiles are used to compare an individual’s score to the scores of other individuals in a group. For example, in educational testing, a student’s percentile rank indicates the percentage of test-takers who scored lower than the student.
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Percentiles are also used to compare performance of a company or stock to its peers in an industry. For example, a company’s return on investment can be compared to the median return of all companies in the same industry.
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Percentiles are used to evaluate and compare the performance of a portfolio or fund to a benchmark. For example, a portfolio manager’s performance can be measured by comparing the fund’s returns to the returns of the benchmark index.