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Lecture Notes 4MeanVariance
Lecture Notes 4MeanVariance
Expectation
Definition 4.1
Example:
If a dealer’s profit, in million dollars, on a new
automobile can be looked upon as a random variable X
having the density function:
Example:
Theorem 4.1
Mean of a Random Variable
Mean of a Random Variable
Mean of a Random Variable
Definition 4.3
Variance and Covariance of
Random Variables
Theorem 4.2
Variance and Covariance of
Random Variables
Variance and Covariance of
Random Variables
Variance and Covariance of
Random Variables
Theorem 4.3
Variance and Covariance of
Random Variables
Example:
The length of time, in minutes, for an airplane to obtain
clearance for takeoff at a certain airport is a random variable
Y = 3X −2, where X has the density function:
1 1 1
E ( R) rf (r )dr 6r (1 r )dr (6r 2 6r 3 )dr
2
6r (1 r ) 0 r 1 0 0 0
f R (r )
0 otherwise
3r 4 1 3 1
( 2r
3
) 0 2
2 2 2
Review – Active Learning Exercises
6r (1 r ) 0 r 1
f R (r )
0 otherwise
V ( R) E ( R 2 ) E ( R) 2
V ( R) E[( R E ( R)) 2 ] 1 1
3
1
1
2
1 OR E ( R ) r f (r )dr (6r 3 6r 4 )dr
2 2
V R r 6r 1 r dr 0 0
10
0
2 20
3 1 1
V ( R) ( )2
10 2 20
Means and Variances of Linear
Combinations of Random Variables
Var b 0
Var aX a 2Var X
6r (1 r ) 0 r 1
f R (r )
0 otherwise
1
5 3 5
E P E 3R 1 3r 1 6r 1 r d r E ( P) E (3R 1) 3E ( R) 1 1
0
2 2 2
OR
V P E P2 E P V ( P) V (3R 1) 9V ( R)
2
1 9
9*
1
E P E 3R 1
67
3r 1 6r 1 r d r
2 2 2
10 20 20
0
2
67 5 9
V P
10 2 20
Variance and Covariance of
Random Variables
Covariance indicates how two variables are related.
A positive covariance means the variables are positively related,
while a negative covariance means the variables are inversely related.
Theorem 4.4
Variance and Covariance of
Random Variables
Example:
For the random variables X and Y whose joint density function is
given below, find the covariance.
Variance and Covariance of
Random Variables
The magnitude of covariance does not indicate anything
regarding the strength of the relationship.
Correlation also tells you the degree to which the variables
tend to move together in addition to telling you whether
variables are positively or inversely related.
Recall that:
P ( X x, Y y )
E Y | X x y P (Y y | X x) where P (Y y | X x )
y P( X x)
P ( X x, Y y )
E Y | X x y P (Y y | X x) y
y y P( X x)
E E Y | X x E Y | X x P ( X x )
x
P ( X x, Y y )
E E Y | X x y P( X x)
x y P( X x)
E E Y | X x y P ( X x, Y y ) y h y E Y
x y y
Conditional Expectation
P( X 0, Y 0) 0.10 1
X P( X 0 | Y 0)
P(Y 0) 0.30 3
0 1 2
P( X 1, Y 0) 0.15 1
0 0.10 0.15 0.05 P( X 1 | Y 0)
Y 1 0.17 0.22 0.12 P(Y 0) 0.30 2
2 0.02 0.10 0.07 P( X 2, Y 0) 0.05 1
P( X 2 | Y 0)
P(Y 0) 0.30 6
Theorem 4.10
Example 4.27
Solution: