The variance standard Deviation ariance A measure of risk. The sum of the probabilities that different outcomes will occur multiplied by the squared deviations from the mean of the random variable q1(x1-E[x])2+q2(x2E[X])2+.+qn(xnE[x Standard deviation The square root of the variance Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 The Variance & Standard Deviation Variance • A measure of risk. • The sum of the probabilities that different outcomes will occur multiplied by the squared deviations from the mean of the random variable. s 2 = q1 (x1 - E[x])2 + q2 (x2 - E[x])2 +…+qn (xn - E[x])2 Standard Deviation • The square root of the variance