The Use of Summation Operators

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 The Use of Summation Operators
Because many elementary propositions in statistics (and econometrics) involve the use of sums of numbers, it will
be useful to review (or become acquainted with) summation. Please copy the following equations to your notes.

•Throughout the course, the capital Greek letter capital sigma, ∑, represents the summation of the values of each of
the observations for a variable.

•For example, let X represent the variable “Family Income.”

•Then, using subscript notation,

•X1, X2, …, XN
•represents the values taken by each of the N observations of family income.
•Then total family income (X1 + X2 + …, + XN) can be represented as

• The following summation operator rules are useful. 2

 The Use of Summation Operators
•Rule 1. The summation of the constant k times a variable, is equal to the constant
times the summation of that variable

•Rule 2. The summation of the sum of observations on two variables is equal to

the sum of their summations.

•Rule 3. The summation of a constant over N observations equals the product of

the constant and N.
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 The Use of Summation Operators
•Using these three rules above in the last slide, we can obtain some useful results concerning means, variances, and
covariances of random variables.

•We will restrict ourselves in this presentation to a discussion of algebraic, rather than statistical, properties.

•First, we define the mean or average of N observations on variable X to be

• 

• 
• 
•Using this definition, we can prove Rule 4.

•Rule 4. The summation of the deviations of observations on X about its mean is zero.

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•See proof in the next slide
 Rule 4. The summation of the deviations of observations on X about its mean is zero.

• Proof:

• = - =0

• because
•

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 The Use of Summation Operators
•In the course, we will have frequent opportunities to use the deviations form.

•Using lowercase letters to represent deviations form, this is, , Rule 4

•Rule 4. The summation of the deviations of observations on X about its mean is zero.

•becomes

•
•Now define the variance of X to be

•and the covariance of X and Y to be 6

 The Use of Summation Operators
•Rule 5. The covariance between X and Y is equal to the mean of the products of
observations on X and Y minus the product of their means:

•Proof

•And using Rule 1, we get

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 The Use of Summation Operators
•Now, recalling the definition of the mean of X and the mean of Y, we
have

•Rule 6 will follow from Rule 5, since it applies to the case in which X
and X again are the two variables.

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 The Use of Summation Operators
•Rule 6 follows from Rule 5, since it applies to the case in which X and X again are
the two variables.
•Rule 6. The variance of X is equal to the mean of the squares of observations on X
minus its mean squared.

•Note, incidentally, that when X and Y happen to have zero means (as occurs when
they are measured as deviations about their means), the definitions of covariance
and variance become (we have omitted the range of the index here)

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 The Use of Summation Operators
•In certain situations, it will be necessary to use summations which apply to two random variables,
called double summations.

•Specifically, let Xij be a random variable which takes on N values for each outcome of i and j.

•There will, of course, be N2 total outcomes.

•Now we define the double summation of these N2 out comes as

•The following two double-summation rules, Rule 7 and Rule 8 are useful. 10
 The Use of Summation Operators
•Rule 7.

•Note that the double summation in Rule 7 is very different from the single
summation , which contains N (rather than N2) terms.

•Rule 8.

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