8.4 Variance and Standard Deviation as a Measure of Risk
Put simply, the variance is a way of describing how spread out a set of numbers or values is around its mean or average. The mean is a simple concept. For example, what is the average height of all the students in your finance class? To find the mean, you add the heights of all the students and then divide by the number of students. Knowing the mean, however, doesn’t tell you how spread out the different individual student heights are. Is there an exceptionally tall person in the class? How many students in the class are close to the average height? How many students are taller than the mean? How many are shorter than the mean?
To give us more information about the heights of the students ...
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