## 2.3 Variance and Standard Deviation

#### Variance

- The actual outcome will often differ from the mean (or E(X)). Sometimes the difference is large, sometimes it is not (or even sometimes no difference).

- The variance of a random variable captures the spread of the probability distribution about its mean value. It is defined as

\operatorname{Var}(X)=E\left[(X-\mu)^{2}\right]

and \operatorname{Var}(X) represents the variance of X.

- \operatorname{Var}(X) can also be denoted as the Greek letter \sigma^{2} (called sigma square).

- It is also considered as the long-run average value of the square of the distance from X. Also, notice that there is always \operatorname{Var}(X) \geq 0.

- Instead of having \operatorname{Var}(X)=E\left[(X-\mu)^{2}\right], we can also have