There is a roughly 66 percent chance that the next number in the second set will be between -4.44 and 8.94. There is roughly a 95 percent chance that the number will be within 2 standard deviation of the mean. 95 percent limits for set no. That's it for the maths. The concept of confidence limits can be applied to the to the allocation of assets across classes.
Lets look at some more sets of numbers.
We have taken data on assets classes from June 1979 to October 1999. From the data we have extracted rolling ten-year periods. What we come up with is average returns for these asset classes over ten years and standard deviations for those returns. Using the last 20 years data the average return for investors holding shares for ten years was 15.84 percent. Let's go back to this idea of confidence.