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Genetic association studies have explained only a small proportion of the estimated heritability of complex traits, leaving the remaining heritability "missing." Genetic interactions have been proposed as an explanation for this, because they lead to overestimates of the heritability and are hard to detect. Whether this explanation is true depends on the proportion of variance attributable to genetic interactions, which is difficult to measure in outbred populations. Founder populations exhibit a greater range of kinship than outbred populations, which helps in fitting the epistatic variance. We extend classic theory to founder populations, giving the covariance between individuals due to epistasis of any order. We recover the classic theory as a limit, and we derive a recently proposed estimator of the narrow sense heritability as a corollary. We extend the variance decomposition to include dominance. We show in simulations that it would be possible to estimate the variance from pairwise interactions with samples of a few thousand from strongly bottlenecked human founder populations, and we provide an analytical approximation of the standard error. Applying these methods to 46 traits measured in a yeast (Saccharomyces cerevisiae) cross, we estimate that pairwise interactions explain 10% of the phenotypic variance on average and that third- and higher-order interactions explain 14% of the phenotypic variance on average. We search for third-order interactions, discovering an interaction that is shared between two traits. Our methods will be relevant to future studies of epistatic variance in founder populations and crosses.

Estimation of Epistatic Variance Components and Heritability in Founder Populations and Crosses