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Introduction To Econometrics, 5 Edition: Review: Random Variables, Sampling, Estimation, and Inference
Introduction To Econometrics, 5 Edition: Review: Random Variables, Sampling, Estimation, and Inference
Dougherty
Introduction to Econometrics,
5th edition
Chapter heading
Review: Random Variables,
Sampling, Estimation, and
Inference
X2 E X 2 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
X2 E X 2 2
X2 E X
2
E X 2 2 X 2
E X 2 E 2 X E 2
E X 2 2 E X 2
E X 2 2 2 2
E X 2 2
2
ALTERNATIVE EXPRESSION FOR POPULATION VARIANCE
X2 E X 2 2
X2 E X
2
E X 2 2 X 2
E X 2 E 2 X E 2
E X 2 2 E X 2
E X 2 2 2 2
E X 2 2
3
ALTERNATIVE EXPRESSION FOR POPULATION VARIANCE
X2 E X 2 2
X2 E X
2
E X 2 2 X 2
E X 2 E 2 X E 2
E X 2 2 E X 2
E X 2 2 2 2
E X 2 2
Now the first expected value rule is used to decompose the expression into three separate
expected values.
4
ALTERNATIVE EXPRESSION FOR POPULATION VARIANCE
X2 E X 2 2
X2 E X
2
E X 2 2 X 2
E X 2 E 2 X E 2
E X 2 2 E X 2
E X 2 2 2 2
E X 2 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
X2 E X 2 2
X2 E X
2
E X 2 2 X 2
E X 2 E 2 X E 2
E X 2 2 E X 2
E X 2 2 2 2
E X 2 2
The middle term is rewritten, using the fact that E(X) and mX are just different ways of
writing the population mean of X.
6
ALTERNATIVE EXPRESSION FOR POPULATION VARIANCE
X2 E X 2 2
X2 E X
2
E X 2 2 X 2
E X 2 E 2 X E 2
E X 2 2 E X 2
E X 2 2 2 2
E X 2 2
7
Copyright Christopher Dougherty 2016.
Individuals studying econometrics on their own who feel that they might benefit
from participation in a formal course should consider the London School of
Economics summer school course
EC212 Introduction to Econometrics
http://www2.lse.ac.uk/study/summerSchools/summerSchool/Home.aspx
or the University of London International Programmes distance learning course
EC2020 Elements of Econometrics
www.londoninternational.ac.uk/lse.
2015.12.17