3.8 Variance
SW 2.2
The next most important feature of the distribution of a random variable is its variance. The variance of a random variable \(X\) is a measure of its “spread”, and we will denote it \(\mathrm{var}(X)\) [You might also sometimes see the notation \(\sigma^2\) or \(\sigma_X^2\) for the variance.] The variance is defined as
\[ \mathrm{var}(X) := \mathbb{E}\left[ (X - \mathbb{E}[X])^2 \right] \] Before we move forward, let’s think about why this is a measure of the spread of a random variable.
\((X-\mathbb{E}[X])^2\) is a common way to measure the “distance” between \(X\) and \(\mathbb{E}[X]\). It is always positive (whether \((X - \mathbb{E}[X])\) is positive or negative) which is a good feature for a measure of distance to have. It is also increasing in \(|X-\mathbb{E}[X]|\) which also seems a requirement for a reasonable measure of distance.
Then, the outer expectation averages the above distance across the distribution of \(X\).
An alternative expression for \(\mathrm{var}(X)\) that is often useful in calculations is
\[ \mathrm{var}(X) = \mathbb{E}[X^2] - \mathbb{E}[X]^2 \]
Sometimes, we will also consider the standard deviation of a random variable. The standard deviation is defined as
\[ \textrm{sd}(X) := \sqrt{\mathrm{var}(X)} \] You might also see the notation \(\sigma\) or \(\sigma_X\) for the standard deviation.
The standard deviation is often easier to interpret than the variance because it has the same “units” as \(X\). Variance “units” are squared units of \(X\).
That said, variances more often show up in formulas/derivations this semester.