ALTERNATIVE EXPRESSION FOR POPULATION VARIANCE

σ X2 = E ( X 2 ) − µ 2

This sequence derives an alternative expression for the population variance of a random
variable. It provides an opportunity for practising the use of the expected value rules.

1
 ALTERNATIVE EXPRESSION FOR POPULATION VARIANCE

σ X2 = E ( X 2 ) − µ 2

[
σ X2 = E ( X − µ )
2
]
= E ( X 2 − 2 µX + µ 2 )
= E ( X 2 ) + E (− 2 µX ) + E (µ 2 )
= E ( X 2 ) − 2 µE ( X ) + µ 2
= E (X 2 ) − 2µ 2 + µ 2
= E (X 2 ) − µ 2

We start with the definition of the population variance of X.

2
 ALTERNATIVE EXPRESSION FOR POPULATION VARIANCE

σ X2 = E ( X 2 ) − µ 2

[
σ X2 = E ( X − µ )
2
]
= E ( X 2 − 2 µX + µ 2 )
= E ( X 2 ) + E (− 2 µX ) + E (µ 2 )
= E ( X 2 ) − 2 µE ( X ) + µ 2
= E (X 2 ) − 2µ 2 + µ 2
= E (X 2 ) − µ 2

We expand the quadratic.

3
 ALTERNATIVE EXPRESSION FOR POPULATION VARIANCE

σ X2 = E ( X 2 ) − µ 2

[
σ X2 = E ( X − µ )
2
]
= E ( X 2 − 2 µX + µ 2 )
= E ( X 2 ) + E (− 2 µX ) + E (µ 2 )
= E ( X 2 ) − 2 µE ( X ) + µ 2
= E (X 2 ) − 2µ 2 + µ 2
= E (X 2 ) − µ 2

Now the first expected value rule is used to decompose the expression into three separate
expected values.

4
 ALTERNATIVE EXPRESSION FOR POPULATION VARIANCE

σ X2 = E ( X 2 ) − µ 2

[
σ X2 = E ( X − µ )
2
]
= E ( X 2 − 2 µX + µ 2 )
= E ( X 2 ) + E (− 2 µX ) + E (µ 2 )
= E ( X 2 ) − 2 µE ( X ) + µ 2
= E (X 2 ) − 2µ 2 + µ 2
= E (X 2 ) − µ 2

The second expected value rule is used to simplify the middle term and the third rule is
used to simplify the last one.

5
 ALTERNATIVE EXPRESSION FOR POPULATION VARIANCE

σ X2 = E ( X 2 ) − µ 2

[
σ X2 = E ( X − µ )
2
]
= E ( X 2 − 2 µX + µ 2 )
= E ( X 2 ) + E (− 2 µX ) + E (µ 2 )
= E ( X 2 ) − 2 µE ( X ) + µ 2
= E (X 2 ) − 2µ 2 + µ 2
= E (X 2 ) − µ 2

The middle term is rewritten, using the fact that E(X) and µX are just different ways of writing
the population mean of X.

6
 ALTERNATIVE EXPRESSION FOR POPULATION VARIANCE

σ X2 = E ( X 2 ) − µ 2

[
σ X2 = E ( X − µ )
2
]
= E ( X 2 − 2 µX + µ 2 )
= E ( X 2 ) + E (− 2 µX ) + E (µ 2 )
= E ( X 2 ) − 2 µE ( X ) + µ 2
= E (X 2 ) − 2µ 2 + µ 2
= E (X 2 ) − µ 2

Hence we get the result.

7
Copyright Christopher Dougherty 2016.

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Introduction to Econometrics, fifth edition 2016, Oxford University Press.
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2015.12.17