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04 Expected Value, Variance, Conditional Expectation

The document discusses the concepts of expected value, variance, and conditional expectation for discrete and continuous random variables. It explains how to calculate expected values using probability mass functions and probability density functions, and outlines properties of expectation. Additionally, it covers variance as a measure of deviation from the mean and introduces conditional expectation in the context of dependent random variables.

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4 views5 pages

04 Expected Value, Variance, Conditional Expectation

The document discusses the concepts of expected value, variance, and conditional expectation for discrete and continuous random variables. It explains how to calculate expected values using probability mass functions and probability density functions, and outlines properties of expectation. Additionally, it covers variance as a measure of deviation from the mean and introduces conditional expectation in the context of dependent random variables.

Uploaded by

meghanaalluri2
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Expected value, variance, conditional expectation

Expected Value of Discrete Random Variables:

If X is a discrete random variable with possible values x1,x2,…,xi,…, and probability


mass function 𝑝(𝑥), then the expected value (or mean) of X is denoted E[X] and given
by:

The expected value of X may also be denoted as μX or simply μ if the context is clear.

Note that the expected value in above definition is essentially a weighted average .
Specifically, for a discrete random variable, the expected value is computed by
"weighting'', or multiplying, each value of the random variable, xi𝑥𝑖, by the probability
that the random variable takes that value, 𝑝(𝑥𝑖), and then summing over all possible
values. This interpretation of the expected value as a weighted average explains why it
is also referred to as the mean of the random variable.

If X is a continuous random variable with pdf 𝑓(𝑥), then the expected


value (or mean) of X is given by

The formula for the expected value of a continuous random variable is the continuous
analog of the expected value of a discrete random variable, where instead
of summing over all possible values we integrate.

Exercise: Suppose the discrete random variable X has a Poisson distribution with
parameter λ. Show that E[X]=λ.

Solution:

First, recall that the pmf for Poisson distribution is


Expected Value of Functions of Random Variables:

In many applications, we may not be interested in the value of a random variable itself,
but rather in a function applied to the random variable or a collection of random
variables.

Let X be a random variable and let g be a real-valued function. Define the random
variable 𝑌=𝑔(𝑋).

If X𝑋 is a discrete random variable with possible values x1,x2,…,xi,,…, and probability


mass function 𝑝(𝑥), then the expected value of Y is given by

To find the expected value of a function of a random variable, just apply the function to
the possible values of the random variable in the definition of expected value.

Properties of Expectation:

1. Let g and h be functions, and let a and b be constants. For any random variable
X (discrete or continuous),
2. Let X and Y be ANY random variables (discrete, continuous, independent, or
non-independent). Then

3. Let X and Y be independent random variables, and g, h be functions. Then

Variance of Discrete Random Variables:


The variance of a random variable X is given by

where μ denotes the expected value of X. The standard deviation of X is given by

In words, the variance of a random variable is the average of the squared deviations of
the random variable from its mean (expected value). Notice that the variance of a
random variable will result in a number with units squared, but the standard deviation
will have the same units as the random variable.

For the variance of a continuous random variable, the definition is the same and, only
we now integrate to calculate the value:

Theorem: Let X be any random variable, with mean μ. Then the variance of X is

Proof:
Conditional Expectation:

Suppose that X and Y are discrete random variables, possibly dependent on each other.
Suppose that we fix Y at the value y. This gives us a set of conditional probabilities P(X
= x | Y = y) for all possible values x of X. This is called the conditional distribution of X,
given that Y = y.

Definition: Let X and Y be discrete random variables. The conditional probability


function of X, given that Y = y, is:

We can also find the expectation and variance of X with respect to this conditional
distribution. That is, if we know that the value of Y is fixed at y, then we can find the
mean value of X given that Y takes the value y, and also the variance of X given that Y
= y.

Definition: Let X and Y be discrete random variables. The conditional expectation of X,


given that Y = y, is

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