# Mean, Variance and Relative Standard Deviation

Mean and variance are data descriptors. The mean (μ), the average of an observed population, is computed as:

$$µ=\frac{\sum X}{N}$$

Where: Σ means “the sum of”, X = all the individual items in the group, and N = the number of items in the group.

Variance (σ²), a measure of spread within the data, measures how far each number in the set is from the mean. It is computed by taking the differences between the numbers in the population and the mean, squaring the differences and dividing the sum of the squares by the number of values in the set, i.e.:

$$σ^2 = \frac{\sum (X-μ)^2}{N}$$

Consider the following populations and their descriptive statistics:

Population I: {1,2,3,4,5,6,7,8,9,10}

• mean (μ)= 5.5,
• variance (σ2) = 9.17,
• standard deviation (σ)= 3.03,
• relative standard deviation (σ') = σ/μ = 3.03/5.5 = 0.55

Population II: {10,20,30,40,50,60,70,80,90,100}

• μ = 55,
• σ2 = 917
• σ=30.28,
• σ'= 0.55

Population III: {11,12,13,14,15}

• μ = 13,
• σ2 = 2.5,
• σ=1.58,
• σ'= 0.12

The relative standard deviation (σ'), aka relative standard error (RSE) and coefficient of variation is a scale-invariant measure of variability.

Note that population II differs from population I by a factor of 10. (In general, if a variable Y = βX, then the variance Var(Y) = β2X). The data might indeed be the same, if one set is recorded in millimetres and the other in centimetres. Due to the difference in scale, the variance and the standard deviation of these populations differ substantially, but the relative standard deviation is exactly the same. This is why, in the context of sampling, the relative standard deviation is a more meaningful measure for spread.

Population III has much lower relative standard deviation, which is a reflection of lower spread within this data set.

Previous     Next

Use the Search Bar to find content on MarketingMind.

### Marketing Analytics Workshop In an analytics-driven business environment, this analytics-centred consumer marketing workshop is tailored to the needs of consumer analysts, marketing researchers, brand managers, category managers and seasoned marketing and retailing professionals.

### What they SHOULD TEACH at Business Schools Is marketing education fluffy too?

### Experiential Learning via Simulators | Best Way to Train Marketers Marketing simulators impart much needed combat experiences, equipping practitioners with the skills to succeed in the consumer market battleground. They combine theory with practice, linking the classroom with the consumer marketplace.