Measures of Dispersion: Variance and Standard Deviation

• The variance is the average of the squared deviations from the mean while the
standard deviation is the square root of the variance

Population: Variance
➢ In Excel: =VAR.P(data range)

• Sample: Variance
➢ In Excel: =VAR.S(data range)

Standard Deviation
➢ In Excel: =STDEV.P(data range)

Sample: Standard Deviation

➢ In Excel: =STDEV.S(data range)

Standard Deviation as a Measure of Risk

• Standard deviation is a measure of how much an asset's return varies from its
average return over a set period of time.
• Standard deviation is a commonly used gauge of volatility in securities, funds, and
markets.
• A high standard deviation indicates an asset with larger price swings and greater
risk.
• Using raw data 7, determine which has higher risk of an investment, INTC or GE?