What Is Variance?

• The variance is a measure of variability. It is

calculated by taking the average of squared
deviations from the mean.
• Variance tells you the degree of spread in
your data set.
• The more spread the data, the larger the
variance is in relation to the mean.
 standard deviation

• The standard deviation is derived from variance

and tells you, on average, how far each value lies
from the mean.
• It’s the square root of variance.
• Both measures reflect variability in a distribution,
but their units differ:
• Standard deviation is expressed in the same
units as the original values (e.g., meters).
• Variance is expressed in much larger units (e.g.,
meters squared)
• Since the units of variance are much larger
than those of a typical value of a data set, it’s
harder to interpret the variance number
intuitively. That’s why standard deviation is
often preferred as a main measure of
variability.
• However, the variance is more informative
about variability than the standard deviation,
and it’s used in making statistical inferences.
 steps for calculating the sample
standard deviation:
• Calculate the mean (simple average of the
numbers).
• For each number: subtract the mean.
• Square the result.
• Add up all of the squared results.
• Divide this sum by one less than the number of
data points (N - 1).
• This gives you the sample variance.
• Take the square root of this value to obtain the
sample standard deviation.
• Population Standard Deviation
• The population standard deviation, the standard definition of σ, is used
when an entire population can be measured, and is the square root of
the variance of a given data set.
• In cases where every member of a population can be sampled, the
following equation can be used to find the standard deviation of the
entire population:

• Where xi is an individual value

μ is the mean/expected value
N is the total number of values
• i.e. for the data set 1, 3, 4, 7, 8, i=1 would be 1,
i=2 would be 3, and so on. Hence the summation
notation simply means to perform the operation
of (xi - μ)2 on each value through N, which in this
case is 5 since there are 5 values in this data set.
• EX: μ = (1+3+4+7+8) / 5 = 4.6
σ = √[(1 - 4.6)2 + (3 - 4.6)2 + ... + (8 - 4.6)2)]/5
σ = √(12.96 + 2.56 + 0.36 + 5.76 + 11.56)/5 =
2.577
 Sample Standard Deviation

• In many cases, it is not possible to sample every member within a

population, requiring that the above equation be modified so that the
standard deviation can be measured through a random sample of the
population being studied. A common estimator for σ is the sample
standard deviation, typically denoted by s.

Where xi is one sample value

x̄ is the sample mean
N is the sample size
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standard-deviation-problem-609528
• https://byjus.com/maths/standard-deviation/
 Applications of Standard Deviation

• Standard deviation is widely used in experimental and

industrial settings to test models against real-world
data.
• An example of this in industrial applications is quality
control for some products.
• Standard deviation can be used to calculate a minimum
and maximum value within which some aspect of the
product should fall some high percentage of the time.
• In cases where values fall outside the calculated
range, it may be necessary to make changes to the
production process to ensure quality control.
• Standard deviation is also used in weather to determine differences in
regional climate.
• Imagine two cities, one on the coast and one deep inland, that have the
same mean temperature of 75°F. While this may prompt the belief that
the temperatures of these two cities are virtually the same, the reality
could be masked if only the mean is addressed and the standard deviation
ignored.
• Coastal cities tend to have far more stable temperatures due to regulation
by large bodies of water, since water has a higher heat capacity than land;
essentially, this makes water far less susceptible to changes in
temperature, and coastal areas remain warmer in winter, and cooler in
summer due to the amount of energy required to change the
temperature of the water. Hence, while the coastal city may have
temperature ranges between 60°F and 85°F over a given period of time to
result in a mean of 75°F, an inland city could have temperatures ranging
from 30°F to 110°F to result in the same mean.
• Another area in which standard deviation is largely used is finance,
where it is often used to measure the associated risk in price
fluctuations of some asset or portfolio of assets.
• The use of standard deviation in these cases provides an estimate
of the uncertainty of future returns on a given investment.
• For example, in comparing stock A that has an average return of 7%
with a standard deviation of 10% against stock B, that has the same
average return but a standard deviation of 50%, the first stock
would clearly be the safer option, since the standard deviation of
stock B is significantly larger, for the exact same return. That is not
to say that stock A is definitively a better investment option in this
scenario, since standard deviation can skew the mean in either
direction. While Stock A has a higher probability of an average
return closer to 7%, Stock B can potentially provide a significantly
larger return (or loss).
Types of data
 Chi-squared test
• A chi-square (χ2) statistic is a test that
measures how a model compares to actual
observed data.
• The data used in calculating a chi-square
statistic must be random, raw, mutually
exclusive, drawn from independent variables,
and drawn from a large enough sample. For
example, the results of tossing a fair coin
meet these criteria.
• Chi-square tests are often used to test
hypotheses. The chi-square statistic compares
the size of any discrepancies between the
expected results and the actual results, given
the size of the sample and the number of
variables in the relationship.
• For these tests, degrees of freedom are used
to determine if a certain null hypothesis can
be rejected based on the total number of
variables and samples within the experiment.
• As with any statistic, the larger the sample
size, the more reliable the results.
• Degrees of Freedom
• Degrees of freedom are the number of independent variables
that can be estimated in a statistical analysis. These value of
these variables are without constraint, although the values do
impost restrictions on other variables if the data set is to
comply with estimate parameters.
What Does a Chi-Square Statistic Tell
You?
• There are two main kinds of chi-square tests: 1.
The test of independence, which asks a question
of relationship, such as, "Is there a relationship
between student gender and course choice?“
2. Goodness-of-Fit
χ2 provides a way to test how well a sample of data
matches the (known or assumed) characteristics
of the larger population that the sample is
intended to represent. This is known as goodness
of fit.
• When considering student gender and course choice,
a χ2 test for independence could be used. To do this
test, the researcher would collect data on the two
chosen variables (gender and courses picked) and
then compare the frequencies at which male and
female students select among the offered classes
using the formula given above and a χ2 statistical
table.
• If there is no relationship between gender and
course selection (that is, if they are independent),
then the actual frequencies at which male and
female students select each offered course should be
expected to be approximately equal, or conversely,
the proportion of male and female students in any
selected course should be approximately equal to
the proportion of male and female students in the
sample.
• A χ2 test for independence can tell us how
likely it is that random chance can explain any
observed difference between the actual
frequencies in the data and these theoretical
expectations.
 Goodness-of-Fit

• For example, consider an imaginary coin with exactly a 50/50

chance of landing heads or tails and a real coin that you toss 100
times. If this coin is fair, then it will also have an equal probability of
landing on either side, and the expected result of tossing the coin
100 times is that heads will come up 50 times and tails will come up
50 times.4
• In this case, χ2 can tell us how well the actual results of 100 coin
flips compare to the theoretical model that a fair coin will give
50/50 results. The actual toss could come up 50/50, or 60/40, or
even 90/10. The farther away the actual results of the 100 tosses is
from 50/50, the less good the fit of this set of tosses is to the
theoretical expectation of 50/50, and the more likely we might
conclude that this coin is not actually a fair coin.
 When to Use a Chi-Square Test

• A chi-square test is used to help determine if

observed results are in line with expected
results, and to rule out that observations are
due to chance.
• A chi-square test is appropriate for this when
the data being analyzed are from a random
sample, and when the variable in question is a
categorical variable.
• A categorical variable is one that consists of
selections such as type of car, race, educational
attainment, male or female, or how much
somebody likes a political candidate (from
• These types of data are often collected via survey
responses or questionnaires. Therefore, chi-
square analysis is often most useful in analyzing
this type of data. very much to very little).
 How to Perform a Chi-Square Test

• These are the basic steps whether you are performing a

goodness of fit test or a test of independence:
1. Create a table of the observed and expected frequencies;
2. Use the formula to calculate the chi-square value;
3. Find the critical chi-square value using a chi-square value table
or statistical software;
4. Determine whether the chi-square value or the critical value is
the larger of the two;
5. Reject or accept the null hypothesis.
Example
Problem1
Q.1
Ans
Q.2
Ans
• Step 1: Formulate the hypotheses
 Null Hypothesis:
H0: There is no significant association between
students’ educational level
and their preference for online or face-to-face
instruction.
or
H0: There is no difference in the distribution of
instructional preferences
between undergraduate and graduate students.
• Alternative Hypothesis:
Ha: There is a significant association between
students’ educational level and
their preference for online or face-to-face
instruction.
or
Ha: There is a significant difference in the
distribution of instructional
preferences between undergraduate and
graduate students