Standard deviation

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From Wikipedia, the free encyclopedia

For other uses, see Standard deviation (disambiguation).

A plot of normal distribution (or bell-shaped curve) where

each band has a width of 1 standard deviation – See also: 68–95–99.7 rule.

Cumulative probability of a normal distribution with expected

value 0 and standard deviation 1

In statistics, the standard deviation is a measure of the amount of variation of the values of a
variable about its mean.[1] A low standard deviation indicates that the values tend to be close to
the mean (also called the expected value) of the set, while a high standard deviation indicates that
the values are spread out over a wider range. The standard deviation is commonly used in the
determination of what constitutes an outlier and what does not. Standard deviation may be
abbreviated SD or std dev, and is most commonly represented in mathematical texts and equations
by the lowercase Greek letter σ (sigma), for the population standard deviation, or the Latin letter s, for
the sample standard deviation.

The standard deviation of a random variable, sample, statistical population, data set, or probability
distribution is the square root of its variance. (For a finite population, variance is the average of
the squared deviations from the mean.) A useful property of the standard deviation is that, unlike the
variance, it is expressed in the same unit as the data. Standard deviation can also be used to
calculate standard error for a finite sample, and to determine statistical significance.

When only a sample of data from a population is available, the term standard deviation of the
sample or sample standard deviation can refer to either the above-mentioned quantity as applied to
those data, or to a modified quantity that is an unbiased estimate of the population standard
deviation (the standard deviation of the entire population).

Relationship with standard error and statistical significance

[edit]

The standard deviation of a population or sample and the standard error of a statistic (e.g., of the
sample mean) are quite different, but related. The sample mean's standard error is the standard
deviation of the set of means that would be found by drawing an infinite number of repeated samples
from the population and computing a mean for each sample. The mean's standard error turns out to
equal the population standard deviation divided by the square root of the sample size, and is
estimated by using the sample standard deviation divided by the square root of the sample size. For
example, a poll's standard error (what is reported as the margin of error of the poll) is the expected
standard deviation of the estimated mean if the same poll were to be conducted multiple times. Thus,
the standard error estimates the standard deviation of an estimate, which itself measures how much
the estimate depends on the particular sample that was taken from the population.

In science, it is common to report both the standard deviation of the data (as a summary statistic)
and the standard error of the estimate (as a measure of potential error in the findings). By convention,
only effects more than two standard errors away from a null expectation are considered "statistically
significant", a safeguard against spurious conclusion that is really due to random sampling error.

Basic examples

[edit]

Population standard deviation of grades of eight students

[edit]

Suppose that the entire population of interest is eight students in a particular class. For a finite set of
numbers, the population standard deviation is found by taking the square root of the average of the
squared deviations of the values subtracted from their average value. The marks of a class of eight

students (that is, a statistical population) are the following eight values:

These eight data points have the mean (average) of 5:

First, calculate the deviations of each data point from the mean, and square the result of each:

The variance is the mean of these values:

and the population standard deviation is equal to the square root of the variance:

This formula is valid only if the eight values with which we began form the complete population. If the
values instead were a random sample drawn from some large parent population (for example, there
were 8 students randomly and independently chosen from a student population of 2 million), then
one divides by 7 (which is n − 1) instead of 8 (which is n) in the denominator of the last formula, and

the result is In that case, the result of the original formula would be called the sample standard

deviation and denoted by instead of Dividing by rather than by gives an

unbiased estimate of the variance of the larger parent population. This is known as Bessel's
correction.[2][3] Roughly, the reason for it is that the formula for the sample variance relies on
computing differences of observations from the sample mean, and the sample mean itself was
constructed to be as close as possible to the observations, so just dividing by n would underestimate
the variability.

Standard deviation of average height for adult men

[edit]

If the population of interest is approximately normally distributed, the standard deviation provides
information on the proportion of observations above or below certain values. For example,
the average height for adult men in the United States is about 69 inches,[4] with a standard deviation of
around 3 inches. This means that most men (about 68%, assuming a normal distribution) have a
height within 3 inches of the mean (66–72 inches) – one standard deviation – and almost all men
(about 95%) have a height within 6 inches of the mean (63–75 inches) – two standard deviations. If the
standard deviation were zero, then all men would share an identical height of 69 inches. Three
standard deviations account for 99.73% of the sample population being studied, assuming the
distribution is normal or bell-shaped (see the 68–95–99.7 rule, or the empirical rule, for more
information).

Definition of population values

[edit]

Let μ be the expected value (the average) of random variable X with density f(x): The standard

deviation σ of X is defined as which can be shown to equal

Using words, the standard deviation is the square root of the variance of X.

The standard deviation of a probability distribution is the same as that of a random variable having
that distribution.

Not all random variables have a standard deviation. If the distribution has fat tails going out to infinity,
the standard deviation might not exist, because the integral might not converge. The normal
distribution has tails going out to infinity, but its mean and standard deviation do exist, because the

tails diminish quickly enough. The Pareto distribution with parameter has a mean, but not a
standard deviation (loosely speaking, the standard deviation is infinite). The Cauchy distribution has
neither a mean nor a standard deviation.

Discrete random variable

[edit]

In the case where X takes random values from a finite data set x1, x2, ..., xN, with each value having the
same probability, the standard deviation is

Note: The above expression has a built-in bias. See the discussion on Bessel's correction further
down below.

or, by using summation notation,

If, instead of having equal probabilities, the values have different probabilities, let x1 have
probability p1, x2 have probability p2, ..., xN have probability pN . In this case, the standard deviation will

be

Continuous random variable

[edit]

The standard deviation of a continuous real-valued random variable X with probability density

function p(x) is

and where the integrals are definite integrals taken for x ranging over X, which represents the set of
possible values of the random variable X.

In the case of a parametric family of distributions, the standard deviation can often be expressed in
terms of the parameters for the underlying distribution. For example, in the case of the log-normal
distribution with parameters μ and σ2 for the underlying normal distribution, the standard deviation of

the log-normal variable is given by the expression

Estimation

[edit]

See also: Sample variance

Main article: Unbiased estimation of standard deviation

One can find the standard deviation of an entire population in cases (such as standardized testing)
where every member of a population is sampled. In cases where that cannot be done, the standard
deviation σ is estimated by examining a random sample taken from the population and computing
a statistic of the sample, which is used as an estimate of the population standard deviation. Such a
statistic is called an estimator, and the estimator (or the value of the estimator, namely the estimate)
is called a sample standard deviation, and is denoted by s (possibly with modifiers).

Unlike in the case of estimating the population mean of a normal distribution, for which the sample
mean is a simple estimator with many desirable properties (unbiased, efficient, maximum likelihood),
there is no single estimator for the standard deviation with all these properties, and unbiased
estimation of standard deviation is a very technically involved problem. Most often, the standard
deviation is estimated using the corrected sample standard deviation (using N − 1), defined below,
and this is often referred to as the "sample standard deviation", without qualifiers. However, other
estimators are better in other respects: the uncorrected estimator (using N) yields lower mean
squared error, while using N − 1.5 (for the normal distribution) almost completely eliminates bias.

Uncorrected sample standard deviation

[edit]

The formula for the population standard deviation (of a finite population) can be applied to the
sample, using the size of the sample as the size of the population (though the actual population size
from which the sample is drawn may be much larger). This estimator, denoted by sN, is known as
the uncorrected sample standard deviation, or sometimes the standard deviation of the

sample (considered as the entire population), and is defined as follows:[5]

where are the observed values of the sample items, and is the mean value of these
observations, while the denominator N stands for the size of the sample: this is the square root of the
sample variance, which is the average of the squared deviations about the sample mean.

This is a consistent estimator (it converges in probability to the population value as the number of
samples goes to infinity), and is the maximum-likelihood estimate when the population is normally
distributed.[6] However, this is a biased estimator, as the estimates are generally too low. The bias
decreases as sample size grows, dropping off as 1/N, and thus is most significant for small or

moderate sample sizes; for the bias is below 1%. Thus for very large sample sizes, the
uncorrected sample standard deviation is generally acceptable. This estimator also has a uniformly
smaller mean squared error than the corrected sample standard deviation.

Corrected sample standard deviation

[edit]

If the biased sample variance (the second central moment of the sample, which is a downward-
biased estimate of the population variance) is used to compute an estimate of the population's

standard deviation, the result is

Here taking the square root introduces further downward bias, by Jensen's inequality, due to the
square root's being a concave function. The bias in the variance is easily corrected, but the bias from
the square root is more difficult to correct, and depends on the distribution in question.
An unbiased estimator for the variance is given by applying Bessel's correction, using N − 1 instead

of N to yield the unbiased sample variance, denoted s2:

This estimator is unbiased if the variance exists and the sample values are drawn independently with
replacement. N − 1 corresponds to the number of degrees of freedom in the vector of deviations from

the mean,

Taking square roots reintroduces bias (because the square root is a nonlinear function which does

not commute with the expectation, i.e. often ), yielding the corrected sample standard

deviation, denoted by s:

As explained above, while s2 is an unbiased estimator for the population variance, s is still a biased
estimator for the population standard deviation, though markedly less biased than the uncorrected
sample standard deviation. This estimator is commonly used and generally known simply as the
"sample standard deviation". The bias may still be large for small samples (N less than 10). As sample
size increases, the amount of bias decreases. We obtain more information and the difference

between and becomes smaller.

Unbiased sample standard deviation

[edit]

For unbiased estimation of standard deviation, there is no formula that works across all distributions,
unlike for mean and variance. Instead, s is used as a basis, and is scaled by a correction factor to
produce an unbiased estimate. For the normal distribution, an unbiased estimator is given by ⁠s/c4⁠,
where the correction factor (which depends on N) is given in terms of the Gamma function, and

equals:

This arises because the sampling distribution of the sample standard deviation follows a (scaled) chi
distribution, and the correction factor is the mean of the chi distribution.

An approximation can be given by replacing N − 1 with N − 1.5, yielding:

The error in this approximation decays quadratically (as ⁠1/N2⁠), and it is suited for all but the smallest
samples or highest precision: for N = 3 the bias is equal to 1.3%, and for N = 9 the bias is already less
than 0.1%.

A more accurate approximation is to replace N − 1.5 above with N − 1.5 + ⁠1/8(N − 1)⁠.[7]

For other distributions, the correct formula depends on the distribution, but a rule of thumb is to use

the further refinement of the approximation:

where γ2 denotes the population excess kurtosis. The excess kurtosis may be either known
beforehand for certain distributions, or estimated from the data.[8]

Confidence interval of a sampled standard deviation

[edit]

See also: Margin of error, Variance § Distribution of the sample variance, and Student's t-distribution
§ Robust parametric modeling

The standard deviation we obtain by sampling a distribution is itself not absolutely accurate, both for
mathematical reasons (explained here by the confidence interval) and for practical reasons of
measurement (measurement error). The mathematical effect can be described by the confidence
interval or CI.

To show how a larger sample will make the confidence interval narrower, consider the following
examples: A small population of N = 2 has only one degree of freedom for estimating the standard
deviation. The result is that a 95% CI of the SD runs from 0.45 × SD to 31.9 × SD; the factors here are
as follows:

where is the p-th quantile of the chi-square distribution with k degrees of freedom, and 1 − α is
the confidence level. This is equivalent to the following:

With k = 1, q0.025 = 0.000982 and q0.975 = 5.024. The reciprocals of the square roots of these two
numbers give us the factors 0.45 and 31.9 given above.

A larger population of N = 10 has 9 degrees of freedom for estimating the standard deviation. The
same computations as above give us in this case a 95% CI running from 0.69 × SD to 1.83 × SD. So
even with a sample population of 10, the actual SD can still be almost a factor 2 higher than the
sampled SD. For a sample population N = 100, this is down to 0.88 × SD to 1.16 × SD. To be more
certain that the sampled SD is close to the actual SD we need to sample a large number of points.

These same formulae can be used to obtain confidence intervals on the variance of residuals from
a least squares fit under standard normal theory, where k is now the number of degrees of
freedom for error.

Bounds on standard deviation

[edit]

For a set of N > 4 data spanning a range of values R, an upper bound on the standard deviation s is
given by s = 0.6R.[9] An estimate of the standard deviation for N > 100 data taken to be approximately
normal follows from the heuristic that 95% of the area under the normal curve lies roughly two
standard deviations to either side of the mean, so that, with 95% probability the total range of
values R represents four standard deviations so that s ≈ R/4. This so-called range rule is useful
in sample size estimation, as the range of possible values is easier to estimate than the standard
deviation. Other divisors K(N) of the range such that s ≈ R/K(N) are available for other values of N and
for non-normal distributions.[10]

Identities and mathematical properties

[edit]

The standard deviation is invariant under changes in location, and scales directly with the scale of the

random variable. Thus, for a constant c and random variables X and Y:

The standard deviation of the sum of two random variables can be related to their individual standard
deviations and the covariance between them:

where and stand for variance and covariance, respectively.

The calculation of the sum of squared deviations can be related to moments calculated directly from
the data. In the following formula, the letter E is interpreted to mean expected value, i.e., mean.

The sample standard deviation can be computed as:

For a finite population with equal probabilities at all points, we have

which means that the standard deviation is equal to the square root of the difference between the
average of the squares of the values and the square of the average value.

See computational formula for the variance for proof, and for an analogous result for the sample
standard deviation.

Interpretation and application

[edit]

Further information: Prediction interval and Confidence interval

 Example of samples from two
populations with the same mean but different standard deviations. Red population has mean 100 and
SD 10; blue population has mean 100 and SD 50.

A large standard deviation indicates that the data points can spread far from the mean and a small
standard deviation indicates that they are clustered closely around the mean.

For example, each of the three populations {0, 0, 14, 14}, {0, 6, 8, 14} and {6, 6, 8, 8} has a mean of 7.
Their standard deviations are 7, 5, and 1, respectively. The third population has a much smaller
standard deviation than the other two because its values are all close to 7. These standard deviations
have the same units as the data points themselves. If, for instance, the data set {0, 6, 8, 14}
represents the ages of a population of four siblings in years, the standard deviation is 5 years. As
another example, the population {1000, 1006, 1008, 1014} may represent the distances traveled by
four athletes, measured in meters. It has a mean of 1007 meters, and a standard deviation of 5
meters.

Standard deviation may serve as a measure of uncertainty. In physical science, for example, the
reported standard deviation of a group of repeated measurements gives the precision of those
measurements. When deciding whether measurements agree with a theoretical prediction, the
standard deviation of those measurements is of crucial importance: if the mean of the
measurements is too far away from the prediction (with the distance measured in standard
deviations), then the theory being tested probably needs to be revised. This makes sense since they
fall outside the range of values that could reasonably be expected to occur if the prediction were
correct and the standard deviation appropriately quantified. See prediction interval.

While the standard deviation does measure how far typical values tend to be from the mean, other
measures are available. An example is the mean absolute deviation, which might be considered a
more direct measure of average distance, compared to the root mean square distance inherent in the
standard deviation.

Application examples

[edit]
The practical value of understanding the standard deviation of a set of values is in appreciating how
much variation there is from the average (mean).

Experiment, industrial and hypothesis testing

[edit]

Standard deviation is often used to compare real-world data against a model to test the model. For
example, in industrial applications the weight of products coming off a production line may need to
comply with a legally required value. By weighing some fraction of the products an average weight can
be found, which will always be slightly different from the long-term average. By using standard
deviations, a minimum and maximum value can be calculated that the averaged weight will be within
some very high percentage of the time (99.9% or more). If it falls outside the range then the
production process may need to be corrected. Statistical tests such as these are particularly
important when the testing is relatively expensive. For example, if the product needs to be opened
and drained and weighed, or if the product was otherwise used up by the test.

In experimental science, a theoretical model of reality is used. Particle physics conventionally uses a
standard of "5 sigma" for the declaration of a discovery. A five-sigma level translates to one chance in
3.5 million that a random fluctuation would yield the result. This level of certainty was required in
order to assert that a particle consistent with the Higgs boson had been discovered in two
independent experiments at CERN,[11] also leading to the declaration of the first observation of
gravitational waves.[12]

Weather

[edit]

As a simple example, consider the average daily maximum temperatures for two cities, one inland
and one on the coast. It is helpful to understand that the range of daily maximum temperatures for
cities near the coast is smaller than for cities inland. Thus, while these two cities may each have the
same average maximum temperature, the standard deviation of the daily maximum temperature for
the coastal city will be less than that of the inland city as, on any particular day, the actual maximum
temperature is more likely to be farther from the average maximum temperature for the inland city
than for the coastal one.

Finance

[edit]

In finance, standard deviation is often used as a measure of the risk associated with price-
fluctuations of a given asset (stocks, bonds, property, etc.), or the risk of a portfolio of
assets[13] (actively managed mutual funds, index mutual funds, or ETFs). Risk is an important factor in
determining how to efficiently manage a portfolio of investments because it determines the variation
in returns on the asset or portfolio and gives investors a mathematical basis for investment decisions
(known as mean-variance optimization). The fundamental concept of risk is that as it increases, the
expected return on an investment should increase as well, an increase known as the risk premium. In
other words, investors should expect a higher return on an investment when that investment carries a
higher level of risk or uncertainty. When evaluating investments, investors should estimate both the
expected return and the uncertainty of future returns. Standard deviation provides a quantified
estimate of the uncertainty of future returns.

For example, assume an investor had to choose between two stocks. Stock A over the past 20 years
had an average return of 10 percent, with a standard deviation of 20 percentage points (pp) and Stock
B, over the same period, had average returns of 12 percent but a higher standard deviation of 30 pp.
On the basis of risk and return, an investor may decide that Stock A is the safer choice, because Stock
B's additional two percentage points of return is not worth the additional 10 pp standard deviation
(greater risk or uncertainty of the expected return). Stock B is likely to fall short of the initial
investment (but also to exceed the initial investment) more often than Stock A under the same
circumstances, and is estimated to return only two percent more on average. In this example, Stock A
is expected to earn about 10 percent, plus or minus 20 pp (a range of 30 percent to −10 percent),
about two-thirds of the future year returns. When considering more extreme possible returns or
outcomes in future, an investor should expect results of as much as 10 percent plus or minus 60 pp,
or a range from 70 percent to −50 percent, which includes outcomes for three standard deviations
from the average return (about 99.7 percent of probable returns).

Calculating the average (or arithmetic mean) of the return of a security over a given period will
generate the expected return of the asset. For each period, subtracting the expected return from the
actual return results in the difference from the mean. Squaring the difference in each period and
taking the average gives the overall variance of the return of the asset. The larger the variance, the
greater risk the security carries. Finding the square root of this variance will give the standard
deviation of the investment tool in question.

Financial time series are known to be non-stationary series, whereas the statistical calculations
above, such as standard deviation, apply only to stationary series. To apply the above statistical tools
to non-stationary series, the series first must be transformed to a stationary series, enabling use of
statistical tools that now have a valid basis from which to work.

Geometric interpretation

[edit]

To gain some geometric insights and clarification, we will start with a population of three
values, x1, x2, x3. This defines a point P = (x1, x2, x3) in R3. Consider the line L = {(r, r, r) : r ∈ R}. This is the
"main diagonal" going through the origin. If our three given values were all equal, then the standard
deviation would be zero and P would lie on L. So it is not unreasonable to assume that the standard
deviation is related to the distance of P to L. That is indeed the case. To move orthogonally from L to
the point P, one begins at the point:

whose coordinates are the mean of the values we started out with.

show

Derivation of
A little algebra shows that the distance between P and M (which is the same as the orthogonal

distance between P and the line L) is equal to the standard deviation of the vector (x1, x2, x3),
multiplied by the square root of the number of dimensions of the vector (3 in this case).

Chebyshev's inequality

[edit]

Main article: Chebyshev's inequality

An observation is rarely more than a few standard deviations away from the mean. Chebyshev's
inequality ensures that, for all distributions for which the standard deviation is defined, the amount of
data within a number of standard deviations of the mean is at least as much as given in the following
table.

Distance from mean Minimum population

50%

75%

89%

94%

96%

97%

[14]

Rules for normally distributed data

[edit]
 Dark blue is one standard deviation on either side of the
mean. For the normal distribution, this accounts for 68.27 percent of the set; while two standard
deviations from the mean (medium and dark blue) account for 95.45 percent; three standard
deviations (light, medium, and dark blue) account for 99.73 percent; and four standard deviations
account for 99.994 percent. The two points of the curve that are one standard deviation from the
mean are also the inflection points.

The central limit theorem states that the distribution of an average of many independent, identically
distributed random variables tends toward the famous bell-shaped normal distribution with
a probability density function of

where μ is the expected value of the random variables, σ equals their distribution's standard deviation
divided by n1⁄2, and n is the number of random variables. The standard deviation therefore is simply a
scaling variable that adjusts how broad the curve will be, though it also appears in the normalizing
constant.

If a data distribution is approximately normal, then the proportion of data values within z standard
deviations of the mean is defined by:

where is the error function. The proportion that is less than or equal to a number, x, is given by
the cumulative distribution function:[15]

If a data distribution is approximately normal then about 68 percent of the data values are within one
standard deviation of the mean (mathematically, μ ± σ, where μ is the arithmetic mean), about 95
percent are within two standard deviations (μ ± 2σ), and about 99.7 percent lie within three standard
deviations (μ ± 3σ). This is known as the 68–95–99.7 rule, or the empirical rule.

For various values of z, the percentage of values expected to lie in and outside the symmetric
interval, CI = (−zσ, zσ), are as follows:
 Percentage within(z)
z(Percentage within)

Proportion within Proportion without

Confidence
interval
Percentage Percentage Fraction

0.318639σ 25% 75% 3/4

0.674490σ 50% 50% 1/2

0.977925σ 66.6667% 33.3333% 1/3

0.994458σ 68% 32% 1 / 3.125

1σ 68.2689492% 31.7310508% 1 / 3.1514872

1.281552σ 80% 20% 1/5

1.644854σ 90% 10% 1 / 10

1.959964σ 95% 5% 1 / 20

2σ 95.4499736% 4.5500264% 1 / 21.977895

2.575829σ 99% 1% 1 / 100

3σ 99.7300204% 0.2699796% 1 / 370.398

3.290527σ 99.9% 0.1% 1 / 1000

3.890592σ 99.99% 0.01% 1 / 10000

4σ 99.993666% 0.006334% 1 / 15787

4.417173σ 99.999% 0.001% 1 / 100000

 1 / 147159.5358
4.5σ 99.9993204653751% 0.0006795346249%
6.8 / 1000000

4.891638σ 99.9999% 0.0001% 1 / 1000000

5σ 99.9999426697% 0.0000573303% 1 / 1744278

5.326724σ 99.99999% 0.00001% 1 / 10000000

5.730729σ 99.999999% 0.000001% 1 / 100000000

6σ 99.9999998027% 0.0000001973% 1 / 506797346

6.109410σ 99.9999999% 0.0000001% 1 / 1000000000

6.466951σ 99.99999999% 0.00000001% 1 / 10000000000

6.806502σ 99.999999999% 0.000000001% 1 / 100000000000

7σ 99.9999999997440% 0.000000000256% 1 / 390682215445

Standard deviation matrix

[edit]

The standard deviation matrix is the extension of the standard deviation to multiple dimensions.

It is the symmetric square root of the covariance matrix .[16]

linearly scales a random vector in multiple dimensions in the same way that does in one

dimension. A scalar random variable with variance can be written as , where

has unit variance. In the same way, a random vector in several dimensions with

covariance can be written as , where is a normalized variable with identity

covariance . This requires that . There are then infinite solutions for , and consequently

there are multiple ways to whiten the distribution.[17] The symmetric square root of is one of the
solutions.

For example, a multivariate normal vector can be defined as , where is the

multivariate standard normal.[16]

Properties
[edit]

• The eigenvectors and eigenvalues of correspond to the axes of the 1 sd error ellipsoid of
the multivariate normal distribution. See Multivariate normal distribution: geometric

interpretation. The standard deviation ellipse (green)

of a two-dimensional normal distribution

• The standard deviation of the projection of the multivariate distribution (i.e. the marginal

distribution) on to a line in the direction of the unit vector equals .[16]

• The standard deviation of a slice of the multivariate distribution (i.e. the conditional

distribution) along the line in the direction of the unit vector equals .[16]

• The discriminability index between two equal-covariance distributions is their Mahalanobis

distance, which can also be expressed in terms of the sd matrix: , where is the
mean-difference vector.[16]

• Since scales a normalized variable, it can be used to invert the transformation, and

make it decorrelated and unit-variance: has zero mean and identity covariance. This is
called the Mahalanobis whitening transform.