Variance
Variance measures the dispersion of the set of data points around their mean.
Example:
Population: 1, 2, 3, 4, 5
- mean of population: 3
- Population variance: 2
- Sample variance: 2.5
The sample variance is higher than the population variance for the same data in the above example because: by calculating the sample variance of the population, we are telling that dataset 1,2,3,4&5 are sample data from a bigger population. let us assume the bigger population as 1,1,2,2,3,3,4,4,5,5
in this case, the population variance is coming as 2.96. Our sample variance has rightfully corrected upwards in order to reflect the higher potential variability. This is the reason why there are different formulas for sample and population datas.
The formulas for calculating variance in excel:
- =var.p(dataset)
- =var.s(dataset)