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Expected Value of Random Variables

1) The expected value of a random variable is the weighted average of all possible outcomes. It is calculated by taking the sum of each value multiplied by its probability. 2) The expected value of a function of a random variable can be calculated by finding the expected value of the random variable and plugging it into the function. 3) The variance of a random variable is the expected value of the squared differences from the expected value. It measures how far the values are spread out from the expected value. The standard deviation is the square root of the variance.

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Honiel091112
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653 views

Expected Value of Random Variables

1) The expected value of a random variable is the weighted average of all possible outcomes. It is calculated by taking the sum of each value multiplied by its probability. 2) The expected value of a function of a random variable can be calculated by finding the expected value of the random variable and plugging it into the function. 3) The variance of a random variable is the expected value of the squared differences from the expected value. It measures how far the values are spread out from the expected value. The standard deviation is the square root of the variance.

Uploaded by

Honiel091112
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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EXPECTED VALUE OF RANDOM VARIABLES  The Expected Value of a Function of a Random Variable

 Expected Value – one of the most important probabilistic  Let X be a discrete random variable with probability
concepts in statistics. distribution given by
– it is also referred to as the population mean.
– it is denoted by E(x) or simply 𝜇. x x1 x2 ... xn
 it is a weighted average of the F(x) = P(X = x) f(x1) f(x2) ... f(xn)
possible values of x.

 For a discrete random variables x with values x1, x2, x3, The expected value of g(X), a function of the discrete
… and corresponding probabilities P(X = xi), the random variable X, is E( g (X)) = ∑𝑛𝑖=1 𝑔 (xi) f (xi)
expected value of x is completed as
EXAMPLE:
𝜇 = E(x) = ∑(𝑥) • P(X = x) A used car dealer finds that in any day, the probability of
selling no car is 4.0, one car is 0.2, two cars is 0.15, 3 cars is 0.10, 4
EXAMPLE: cars is 0.08, five cars is 0.06, and six cars is 0.01. Let X = number of
In a game of chance, a man is paid ₱ 50 if he gets all heads or cars sold and let Y = g (X) = 500 + 1, 500 X representing the
all tails when 3 coins are tossed and he pays ₱ 30 if either 1 or 2 heads salesman’s daily earning. Find the salesman’s expected daily earnings.
show. What is his expected gain?
Probability Distribution:
Let x = gain, x is a discrete random variable with 2 possible values: x 0 1 2 3 4 5 6
50 and -30.
x = 50 is associated with the event (HHH, TTT), while f(x) 0.4 0.2 0.15 0.10 0.08 0.06 0.01
x = -30 is associated with the event (HHT, HTH, HTT, THH, THT,
TTH)
x 0 1 2 3 4 5 6
g(x) 500 2,000 3,500 5,000 6,500 8,000 9,500
x 50 -30

2 6 E(Y) = E ( g(X))
P(X = x)
8 8 = (500)(0.4) + (2,000)(0.2) + (3, 500)(0.15) + (5, 000)(0.1) +
(6, 500)(0.08) + (8, 000)(0.06) + (9, 500)(0.01)
2 6
E(x) = (50)(8) + (-30)(8) = 200 + 400 + 525 + 500 + 520 + 480 + 95
= 2, 720
= 12.5 + (-22.5)
= -10 The salesman is expected to earn ₱ 2, 720 per day.
 The expected value of a linear function of a random Let x be the number on each ball.
variable is E ( aX + b) = aE ( X ) + b, where a and b are
fixed numbers. Probability distribution:

E (Y) = E ( g(X)) = E (500 + 1,500X) = 500 + 1,500E (X) Number on ball, x 0 2 4 6 8


= 500 + 1, 500 {0 (0.4) + 1(0.2) + 2(0.15) + 3(0.1) + 1 1 1 1 1
4(0.08) + 5(0.06) + 6(0.01)} Probability, P (X = x)
5 5 5 5 5
= 500 + 1,500 (1.48)
= 500 + 2,220 The expected value is:
= 2,720
E (X) = ∑ 𝑥 • P(X = x)
 Variance and Standard Deviation of a Random Variable 1 1 1 1 1
= 0( ) + 2( ) + 4 ( ) + 6( ) + 8( )
5 5 5 5 5
 For a discrete random variable X with values x1, x2,
2 4 6 8
x3, . . . , which occur with probabilities P(X = x), the =0+ + + +
variance of X is calculated as 5 5 5 5
20
𝜎2 = V (X) = E[ (X – 𝜇 )2 ] = ∑( 𝑥 − 𝜇 )2 P(X = x) =
5

The standard deviation of X is SD ( X ) = 𝜎 = 𝜎2 . = 4.0

 Computational formula for the variance of a random The variance is:


variable:
𝜎2 = V (X) = ∑[x2 • P(X = x)] – [ E (X) ]2
𝜎2 = V (X) = E (X2) – [ E (X) ]2
1 1 1 1 1
= ∑[x2 • P(X = x)] – [ E (X) ]2 = [ 02( ) + 2 ( ) + 4 ( ) + 6 ( ) + 8 ( )] – 4
2 2 2 2 2
5 5 5 5 5

EXAMPLES: 4 16 36 64
= (0 + + + + ) – 16
Five balls numbered 0, 2, 4, 6, and 8 are placed in a bag. 5 5 5 5
After the balls are mixed, one ball is picked and its number is
noted, then it is replaced in the bag. If this experiment is repeated = 24 – 16
many times, find the variance and the standard deviation of the
numbers on the balls. =8
The standard deviation is:
SD (X) = 𝜎 = √8 = 2.83

x P (X = x) x • P (X = x) x2 • P (X = x)

0 0.2 0 0

2 0.2 0.4 0.8

4 0.2 0.8 3.2

6 0.2 1.2 7.2

8 0.2 1.6 12.8

∑ 𝑥 • P (X = x) = 4.0 ∑ 𝑥2 • P (X = x) = 24

Var (X) = 𝜎 2 = 24 – 42 = 8

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