Decile

What Is a Decile?

A decile is a way of splitting a ranked list into ten equal-sized parts. Each part, or bucket, contains about ten percent of the items. The first decile holds the lowest ten percent of values, the tenth decile holds the highest ten percent, and the groups in between cover the rest. Deciles are often used in investing and finance to compare stocks, funds, or portfolios by sorting them on some measure, such as price-to-earnings ratio, market capitalization, or past returns, and then grouping them.

How Deciles Work

Deciles belong to a family of measures called quantiles, which divide data into equal-sized groups. Quartiles split data into four groups and percentiles split it into one hundred. The ninth decile marks the value below which ninety percent of observations fall, which is the same as the ninetieth percentile. The fifth decile is the median.

To form deciles, analysts rank every item from lowest to highest and then assign each item to a group based on its position. For example, if an index has 500 stocks sorted by dividend yield, the top 50 stocks would fall into the tenth decile and the bottom 50 into the first.

Why Investors Look at Deciles

Deciles are useful in factor investing and academic research because they show how returns or risks change across the range of a characteristic. An analyst might compare average returns for each decile to see whether companies with low valuations have historically performed differently from those with high valuations. Looking at the full spread, rather than only the average, can reveal patterns that a single summary figure would hide.

Limitations

Decile results depend heavily on how the underlying data is ranked and which items are included. Small sample sizes can make groups uneven, and ties in the data can push items into adjacent groups. Past patterns shown in decile tables describe historical data and do not guarantee future results.