BNET Business Dictionary
Business Definition for: Variance
- the square of a standard deviation
- a measure of the difference between actual performance and forecast, or standard, performance. Variance is a key measure in statistical process control.
- the difference between a planned, budgeted, or standard cost and the actual cost incurred. The same comparisons may be made for revenues.
Wiktionary Definition for: Variance
- #The act of varying or the state of being variable
- #A difference between what is expected and what happens
- #The state of differing or being in conflict
- #A discrepancy, especially between two legal documents
- #(''statistics'') the square of the standard deviation
- English variance
Additional Resources
- An Economic Motivation for Variance Contracts
- Variance contracts permit the trading of 'Variance risk', i.e. the risk that the squared volatility of stock returns changes randomly over time. The authors discuss why investors might want to trade this type of risk, and why they might prefer a variance contract to standard calls and puts for this...
- White papers 2004-11-14
- Variance Report
- A variance report calculates the variance in days between your original planned baseline completion date and your actual or estimated completion date. This template helps you create a variance report quickly and easily.
- Tools & templates 2004-05-01
- Market Price of Variance Risk and Performance of Hedge Funds
- This paper implements a model-free approach to measure the market price of the variance risk. In this approach, the value of the variance contract is estimated from prices of traded options. The paper finds that when the variance risk is priced, its risk premium is negative and economically very large....
- White papers 2004-03-01
- Some New Variance Bounds for Asset Prices
- When equity prices are determined as the discounted sum of current and expected future dividends, Shiller (1981) and LeRoy and Porter (1981) derived a relationship between the variance of the price of equities, pt, and the variance of the ex post realized discounted sum of current and future dividends: p*t:...
- White papers 2004-12-01
- Optimal Reinsurance Under Mean-Variance Premium Principles
- This white paper presents the derivation of optimal reinsurance under premium principles based on the mean and variance of the reinsurer's share of the total claim amount. Both global reinsurance and local reinsurance are studied. The paper further explores certain examples considered in this context which includes standard deviation principle...
- White papers 2000-10-04
- Plan Vs. Actual Variance Report (Financial Services)
- This template is designed to help finance professionals analyze key line items from the income statement profit and loss statement and the balance sheet against annual financial plans to determine overall progress toward your organization's financial goals. The user can enter planned and actual data on this template and see...
- Tools & templates 2004-05-03
- Modelling Directional Hedge Funds Mean, Variance and Correlation With Tracker Funds
- Many hedge fund managers use some kind of systematic approach to actively trade the markets. Modelling the returns generated by these dynamic strategies requires allowing for market inefficiencies. In this paper the first two moments, expected value and variance are derived analytically for a general class of trading rules with...
- White papers 2002-08-01
- The Specification of Conditional Expectations
- This paper explores different specifications of conditional expectations. The most common specification, linear least squares, is contrasted with nonparametric techniques that make no assumptions about the distribution of the data. Nonparametric regression is successful in capturing some nonlinearities in financial data, in particular, asymmetric responses of security returns to the...
- White papers 2003-01-01
- Asset Pricing Puzzles: Evidence From Options Markets
- This paper proposes and implements a consumption-based pricing kernel stochastic discount factor testing methodology that focuses on the covariance between the pricing kernel and asset squared excess returns. This covariance has an intuitive economic interpretation as a risk-neutral variance risk-premium, i.e. the difference between the risk-neutral return variance and the...
- White papers 2001-04-01
- The Importance of Nontradable Goods' Prices in Cyclical Real Exchange Rate Fluctuations
- Changes in the price of nontradable goods relative to tradable goods account for roughly 50 percent of the cyclical movements in real exchange rates. This paper argues that fluctuations in the relative price of nontradable to tradable goods are an important source of RERcpi movements. It uses an approach proposed...
- White papers 2005-10-01
- Mean-Variance Optimization: Modern Portfolio Theory
- This article introduces the concepts of Mean-Variance Optimization MVO and Modern Portfolio Theory MPT in both single and multi-period contexts. It is also intended to help one decide which of the two MVO products, VisualMvo or MvoPlus, should one consider for investments. The fundamental goal of portfolio theory is to...
- White papers 2003-01-01
- Sales Trend Analysis
- Use this template to identify sales trends per product per quarter. It calculates the sales variance, determines if the variance is Favorable F or Unfavorable U, and calculates the percentage change (the percentage increase or decrease in sales over last year's level). The column header works with entries in the...
- Tools & templates 2007-09-01
- Keeping Up With Customers: Tomorrow's Customers, Yesterday's Data
- Most direct marketers rely on computerized data of customers to enhance their profitability. Experts however suggest that with time the computerized information often gets redundant. Thus, timely updation of data is essential for minimizing the negative impact of data variance. Researches suggest that the only effective way to combat data...
- White papers 2003-11-01
- Does Inflation Uncertainty Vary with the Level of Inflation?
- The purpose of this study is to test the hypothesis that inflation uncertainty increases at higher levels of inflation. Our analysis is based on the generalized autoregressive conditional heteroscedasticity GARCH class of models, which allow the conditional variance of the error term to be time-varying. Since this variance is a...
- White papers 1996-08-01
- Real Estate Ownership and Operating Businesses: Does Combining Them Make Sense for REITs?
- Variance in returns and risk-adjusted returns of six real estate investment trust REIT property types were analyzed for rent?s connection to operating business. We find that hotel REITs where real estate rents are connected to hotel operations has performed poorly, and retail mall and outlet REIT returns where rents are...
- White papers 2003-01-01
- How Important Are Capital And Total Factor Productivity For Economic Growth?
- The authors examine the relative importance of the growth of physical and human capital and the growth of total factor productivity TFP using newly organized data on 145 countries that span more than one hundred years for twenty-four of these countries. For all countries, only 3 percent of average output...
- White papers 2002-04-01
- On Tail Conditional Variance and Tail Covariances
- This paper examines the tail conditional variance of a risk X defined to be the variability of the risk along its right tail and tail covariance of two risks X1 and X2 defined to explain the linear dependency of the risks along their right tails, and study their potential use...
- White papers 2004-03-28
- A Note on the Pricing and Hedging of Volatility Derivatives
- This paper considers the pricing of volatility products and especially volatility and variance swaps. Under risk-neutral valuation, the paper provides closed form formulae for volatility-average and variance swaps. It also provides a general partial differential equation for derivatives that have an extra dependence on an average of the volatility. It...
- White papers 2001-12-13
- Bayes-Stein Estimators and International Real Estate Asset Allocation
- This article re-examines the issue of international diversification in real estate securities and attempts to address the problem of estimation error in the inputted parameters through the use of alternative techniques. The results see an increased stability in calculated portfolio allocations in comparison to the classical mean-variance tangency approach, and...
- White papers 2003-01-01
- Mistakes and Complexity in Health Care
- Hinckley and Barkan's conformance model predicts defect rates using three sources of defects: variance, mistakes, and complexity. Variance and statistical process control has been studied extensively generally and for health care. Mistakes and complexity have not been as widely addressed. This paper presents evidence that demonstrates the importance of mistakes...
- White papers
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