Z-scores in Investing and Finance: Are You Using Them Right?
7 min readFeb 1, 2022
When risk managers or quant professionals need to compare different metric types or normalize data, z-scores are their go-to measure. In theory, Z-scores are powerful and easy to understand. In practical use, however, they have two strong limitations that can affect their interpretation:
- A high sensitivity to the distribution of underlying data
