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Tutorial 4 Expected Value, Variance and Moment Generating Function

The document discusses expected value, variance, and moment generating functions. [1] Expected value is a weighted average of possible values weighted by their probabilities. [2] Variance measures the expected squared deviation from the expected value and is equal to the expected value of X^2 minus the expected value of X squared. [3] The moment generating function of a random variable X is the expected value of e^tx and its derivatives can be used to find moments like the expected value and variance of X.

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Owusu Ansah Asare Nani
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86 views15 pages

Tutorial 4 Expected Value, Variance and Moment Generating Function

The document discusses expected value, variance, and moment generating functions. [1] Expected value is a weighted average of possible values weighted by their probabilities. [2] Variance measures the expected squared deviation from the expected value and is equal to the expected value of X^2 minus the expected value of X squared. [3] The moment generating function of a random variable X is the expected value of e^tx and its derivatives can be used to find moments like the expected value and variance of X.

Uploaded by

Owusu Ansah Asare Nani
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Tutorial 4

Expected Value, Variance and


Moment Generating Function

1
Expected Value
 If X is a discrete random variable having a
probability mass function p(x), the expectation or
the expected value of X, is defined by

E[ X ]   xp( x)
x: p ( x )  0
 E[X] is a weighted average of the possible
values that X can take on, each value being
weighted by the prob. that X assumes it.

2
Expected Value
 If X is a continuous random variable having a
probability density function f(x), then the
expected value of X is defined by

E[ X ]   xf ( x)dx


 If a and b are constants, then


E[aX  b]  aE[ X ]  b
3
Example 1
 Calculate E[X] if X if a Poisson random variable
with parameter  .


ie  i
E[ X ]  
i 0 i!


e  i

i 1 (i  1)!

i 1
 e  
i 1 (i  1)!

 k
 e 


k  0 ( k )!
 
 e e   4
Example 2
 Calculate the expectation of a random variable
uniformly distributed over (a, b).
b
x
E[ X ]   dx
a
ba
b a 2 2

2(b  a )
ab

2
 The expected value of a random variable uniformly
distributed over the interval (a, b) is just the
midpoint of the interval. 5
Variance
 If X is a random variable with mean ,
then the variance of X is defined by

Var ( X )  E[( X   ) ]
2

 The variance of X measures the expected


square of the deviation of X from its expected
value.

6
Variance
Var ( X )  E[ X ]  ( E[ X ])
2 2

Var ( X )  E[( X   ) 2 ]
  ( x   ) 2 p ( x)
x

  ( x 2  2 x   2 ) p ( x )
x

  x 2 p ( x)  2   xp( x)   2  p ( x)
x x x

 E[ X 2 ]  2  2   2
 E[ X 2 ]   2
7
Variance

 If a and b are constants, then


Var (aX  b)  a Var ( X )
2

 The square root of the Var(X) is called


the standard deviation of X.

8
Example 3
 Calculate Var(X) when x represents the
outcome when a fair die is rolled.
7
E[ X ] 
2
E[ X 2 ]
1 2 1 2 1 2 1 2 1 2 1
 1( )  2 ( )  3 ( )  4 ( )  5 ( )  6 ( )
6 6 6 6 6 6
91

6
91 7 2 35
 Var ( X )   ( ) 
6 2 12
9
Moment Generating Functions

 Moment generating function is define as


follow:
M (t )  E e tX 
  etx p( x) if X is discrete with mass function p(x)
x

or

  e tx f ( x)dx if X is continuous with density f(x)


10
Moment Generating Functions
Then,
d
M' (t)  E etX
dt
 
 d tX 
 E e 
 dt 

 E Xe tX 
 
M' (0)  E Xe ( 0 ) X  E[X]
11
Moment Generating Functions
d
 Similarly, M' ' (t)  M ' (t )
dt
d
 E[ XetX ]
dt
d
 E[ ( XetX )]
dt

 E X 2 etX 
 
M' ' (0)  E X 2 e ( 0 ) X  E[X 2 ]
12
Moment Generating Functions

 In general, the nth derivative of M(t) is


given by
M (t )  E[ X e ]
n n tX
n 1
 Implying that
M (0)  E[ X ]
n n
n 1

13
Example 4
 Binomial Dist. (n,p)
 
M (t )  E e tX
n
 n k
  e   p (1  p ) n  k
tk

k 0 k 
n
n t k
   ( pe ) (1  p )
  nk

k 0  k 

 ( pe  1- p)
t n

n 1
M ' (t )  n( pe  1- p)
t
pe t
14
Example 4 (con’t)
M ' (t )  n( pet  1- p) n 1 pet
M ' ' (t )
 n(n  1)( pe t  1- p) n  2 ( pe t ) 2  n( pe t  1- p) n 1 pe t

 Mean = M’(0) = np

 E[X2] = M’’(0) = n(n-1)p² + np

 Variance = E[X2] – (E[X])²


= n(n-1)p² + np –(np)²
= np(1-p) 15

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