Percentile

Percentiles divide a set of ordered data into 100 equal parts. The 50th percentile, also called the median, is the middle value, with half the observations below it and half above. The 90th percentile is the value below which 90% of the observations fall.

For example, if a household's income is at the 75th percentile, it earns more than 75% of households and less than 25%.

Percentiles are useful because they describe where a value sits within a distribution and are less affected by extreme values than averages. The 25th, 50th and 75th percentiles are called quartiles and are often used to summarise data.

In finance, percentiles are used in many ways. Fund performance is often reported by percentile ranking against similar funds; a fund in the 10th percentile might be among the best or worst, depending on how the ranking is defined, so it is worth checking. Value at Risk is based on a percentile of the distribution of possible losses. Financial planning tools often show outcomes at different percentiles, such as a pessimistic 10th percentile scenario and an optimistic 90th percentile scenario.