Sample variance estimator

What this sample variance estimator question tests

This is an easy foundational question in statistics that quant firms use to verify you understand a critical distinction in estimation theory. It asks you to identify the correct normalisation constant for an unbiased estimator of population variance when working with sample data.

The question probes whether you know why the denominator in the sample variance formula differs from what naive intuition might suggest. This distinction arises because of the relationship between bias, degrees of freedom, and the use of the sample mean as a plug-in estimator. Understanding this concept is essential for anyone working with empirical data in trading, risk, or research roles.

• Bias and unbiasedness in estimators
• Degrees of freedom in sample statistics
• The difference between population and sample variance formulas