It's defined as the average of the squared deviations of the observed values from their arithmetic mean.



Where X is the observed value and E[X] is the arithmetic mean.

It's a measure of the variability or dispersion and it is the second-order moment of the observed value distribution. It's also used as an index for measuring the risk inherent an investment with uncertain returns, estimated on the basis of historical data.

Bibliography
GUSEO R., Statistica, CEDAM, 2006
HARDAKER J. B. and HUIRNE R. B. M., Coping with risk in Agriculture, CABI, 2004
LETI G., Statistica descrittiva, Il Mulino, 1999

Editor: Giuliano DI TOMMASO