Variance

Variance can be calculated in two ways:

  1. Variance assumes that the returns series is a sample of the population. This is the calculation most commonly used.
    If we denote by  the mean of the returns, the variance is:



    where  is a return series, i.e., a sequence of returns for n time periods.
     
  2. Population Variance assumes that the return series is the population.

 
 

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