Mean, Variance, and Standard Deviation

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Statistics Examples
Mean, Variance, and Standard Deviation
Let X1, X2 ,..., Xn be n observations of a random variable X. We wish to measure the average of
X1, X2 ,..., Xn in some sense. One of the most commonly used statistics is the mean, X , defined
by the formula
X  X 
1 n
 Xi
n i 1
Next, we wish to obtain some measure of the variability of the data. The statistics most often
used are the variance and the standard deviation  X   X2 . We have
1

 n 2 1 n
 Xi    Xi 
n
n  i 1 
 i 1
X 
2





It is easy to show that the variance is simply the mean squared deviation from the mean.
Covariance and Correlation
Next, let (X1 , Y1), (X2 , Y2) ,…, (Xn , Yn) be n pairs of values of two random variables X and Y.
We wish to measure the degree to which X and Y vary together, as opposed to being independent.
The first statistic we will calculate is the covariance  XY given by
 XY 
1 n
1 n
 n  
X
Y

X
Yi  
 i i
 i  
n  i 1
n  i 1 
i 1

Actually, a much better measure of correlation can be obtained from the formula
1 n  n 
X
Y


 X Y
i i
n  i 1 i   i 1 i 
i 1
n
XY 
 n 2 1  n  2   n 2 1  n  2 
 Xi    Xi   Yi   Yi  
n  i 1    i 1
n  i 1  
 i 1


The quantity  XY is known as the coefficient of correlation of X and Y.
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The Covariance Matrix
Covariances and variances are sometimes arranged in a matrix known as a covariance matrix. In
our case, the covariance matrix will be a 2  2 matrix:
  2  XY 
C  X
2 
 XY  Y 
The eigenvalues of the covariance matrix are sometimes of interest. These are obtained in the
usual way by solving the characteristic equation:
p     det  I  C 
   X2  XY
 XY    Y2
Statistics Examples
page 2
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