Statistics -> Variance and Linear Combinations

In summary, the first conversation discusses a problem involving rolling two dice and finding the variance in profit. The calculated variance is approximately 2.06 and the expected value is 1.94. The question of whether one would prefer a small or large variance in this game is also considered, with a larger variance being preferred due to the potential for higher values and positive income. The second conversation involves a problem with linear combinations and finding the probability density function and expectation for a random variable. The steps for finding the expectation are explained, with an example of finding the expectation for Y = X^3 given.
  • #1
adc85
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Having a lot of trouble with a particular problem in the topic of variance. The problem is:

"Suppose you are organizing a game where you charge players $2 to roll two dice and then you pay them the difference in scores. What is the variance in your profit from each game? If you are playing a game in which you have positive expected winnings, would you prefer a small or large variance in the winnings?"

I already calculated the variance (more details of the problem were not mentioned b/c I already calculated the variance) and it was around 2.06 and the expected value (mean) is 1.94. I would guess a larger variance because then you can take a chance at trying to get higher values while knowing that you have a good chance of getting a positive income in the end. But I keep second-guesing myself of that and I am just not sure, lol.




Also, having a lot of trouble with linear combinations. For example, I have a problem like this:

Suppose that the random variable X has a probability density function of f(x) = 2x for 0 <= x <= 1. Find the PDF and the expectation of the random variable Y in the following cases:

a. Y = X^3

There are 3 more parts but I can do those myself if I can just figure out how to do one. I just have no idea where to start. I read the book and the notes and still having trouble figuring out what to do here. I guess I need to say for example:

f(x^3) = (2x)^3 = 8x^2 would be the new PDF?

and ...

E(x^3) = (E(x))^3 = ... ?

I don't even know what I am doing ... lol.
 
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  • #2
I guess I need to find the expectation value for the second problem first before doing anything, so:

integral of x*2x = integral of 2x^2 = 2x^3/3 between 1 and 0 = 2(1)^3/3 = (2/3) = .75

So from there I would just say (.75)^3 as the answer for the expectation value for Y = X^3?
 
  • #3
Anyone? Still isn't making sense to me.
 

1. What is variance and why is it important in statistics?

Variance is a measure of how spread out a set of data is from its mean. It is important in statistics because it allows us to quantify the amount of variability in a data set, which is crucial for making accurate predictions and inferences.

2. How is variance calculated?

Variance is calculated by taking the average of the squared differences between each data point and the mean of the data set. This is also known as the mean squared deviation.

3. What is the relationship between variance and standard deviation?

The standard deviation is the square root of the variance. It is often used as a measure of spread in a data set, and is easier to interpret since it is in the same units as the original data.

4. How can variance be used in linear combinations?

In statistics, linear combinations refer to combining multiple variables in a linear equation. Variance can be used to calculate the variance of the linear combination of two or more variables, which is important in understanding the overall variability of the data set.

5. Can variance be negative?

No, variance cannot be negative. It is always a non-negative value since it involves squaring the differences between data points and the mean. If the data is constant (all values are the same), then the variance will be zero.

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