Is there a difference between variance vs variation when calculating returns? Or are they interchangeable terms? I know that the term 'variance' is the one used in formula, but the lecture videos I have throw around the term 'variation' a lot and I'm not sure if they mean variance or some other concept.

Isn't variance a measure of variation?

Variance is a specific, defined term: measure of distribution spread, i.e. how varied a distribution is. This is calculated by measuring the deviation (difference) of each data point from the mean, squaring it, and calculating its average: population variance = σ2=∑(Xi-μ)N 'Variation' is not a specific, defined term, but rather just saying that 'its datapoints are distributed'. Variance is in a way a measure of 'variation' so a lecturer could end up using this interchangeably when explaining concepts, but it's unlikely you'll find a question asking you to calculate the 'variation' of a distribution.

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Variance is a specific, defined term: measure of distribution spread, i.e. how varied a distribution is. This is calculated by measuring the deviation (difference) of each data point from the mean, squaring it, and calculating its average: population variance = σ 2 = ∑ ( X i - μ ) N ' Variation ' is not a specific, defined term, but rather just saying that 'its datapoints are distributed'. Variance is in a way a measure of 'variation' so a lecturer could end up using this interchangeably when explaining concepts, but it's unlikely you'll find a question asking you to calculate the 'variation' of a distribution .

A CFA Level 1 Discussion About Variance Vs Variation

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This topic has 2 replies, 3 voices, and was last updated Apr-218:36 am by Zee Tan.

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- hoothoot
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  11 Apr 2021 at 7:32 pm
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  Is there a difference between variance vs variation when calculating returns? Or are they interchangeable terms?
  
  I know that the term ‘variance’ is the one used in formula, but the lecture videos I have throw around the term ‘variation’ a lot and I’m not sure if they mean variance or some other concept.
- gontata
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  11 Apr 2021 at 10:48 pm
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  Isn’t variance a measure of variation?
- Zee Tan
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  12 Apr 2021 at 8:36 am
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  Variance is a specific, defined term: measure of distribution spread, i.e. how varied a distribution is. This is calculated by measuring the deviation (difference) of each data point from the mean, squaring it, and calculating its average:
  
  population variance = $σ^{2} = \frac{\sum_{}^{} (X_{i} - μ)}{N}$
  
  ‘Variation‘ is not a specific, defined term, but rather just saying that ‘its datapoints are distributed’.
  
  Variance is in a way a measure of ‘variation’ so a lecturer could end up using this interchangeably when explaining concepts, but it’s unlikely you’ll find a question asking you to calculate the ‘variation’ of a distribution.
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