Expected Value and Variance of a

Random Variable

Sanjay Rastogi, IIFT, New Delhi. 1

 Introduction to Probability
Distributions
• Random Variable
– Represents a possible numerical value from
an uncertain event

Random
Variables

Discrete Continuous
Random Variable Random Variable

Sanjay Rastogi, IIFT, New Delhi. 2

 Discrete Random Variables
• Can only assume a countable number of values
Examples:

– Roll a die twice

Let X be the number of times 4 comes up
(then X could be 0, 1, or 2 times)

– Toss a coin 5 times.

Let X be the number of heads
(then X = 0, 1, 2, 3, 4, or 5)
Sanjay Rastogi, IIFT, New Delhi. 3
 Discrete Probability Distribution

Experiment: Toss 2 Coins. Let X = # heads.

4 possible outcomes
Probability Distribution
T T X Value Probability
0 1/4 = 0.25
T H 1 2/4 = 0.50
2 1/4 = 0.25
H T
Probability

0.50

0.25
H H
Sanjay Rastogi, IIFT, New Delhi.0 1 2 X 4
Discrete Random Variable: Summary Measures
• Expected Value (or mean) of a discrete
distribution (Weighted Average)
N
  E(X)   Xi P( Xi )
i1

– Example: Toss 2 coins,

X P(X)
X = # of heads, 0 0.25
compute expected value of X: 1 0.50
E(X) = (0 x 0.25) + (1 x 0.50) + (2 x 0.25) 2 0.25
= 1.0

Sanjay Rastogi, IIFT, New Delhi. 5

Discrete Random Variable: Summary Measures
• Variance of a discrete random variable (continued)
N
σ 2   [X i  E(X)]2 P(Xi )
i1

• Standard Deviation of a discrete random variable

N
σ  σ2   i
[X
i1
 E(X)]2
P(Xi )
where:
E(X) = Expected value of the discrete random variable X
Xi = the ith outcome of X
P(Xi) = Probability of the ith occurrence of X

Sanjay Rastogi, IIFT, New Delhi. 6

Discrete Random Variable: Summary Measures

Example: Toss 2 coins, X = # heads, (continued)

compute standard deviation (recall E(X) =
1)

σ  [X i
 E(X)] P(X i ) 2

σ  (0  1)2 (0.25)  (1  1)2 (0.50)  (2  1)2 (0.25)  0.50  0.707

Possible number of heads

= 0, 1, or 2

Sanjay Rastogi, IIFT, New Delhi. 7

 Continuous Probability Distributions
• A continuous random variable is a variable that can
assume any value on a continuum (can assume an
uncountable number of values)
– thickness of an item
– time required to complete a task
– temperature of a solution
– height, in inches
• These can potentially take on any value, depending
only on the ability to measure accurately.

Sanjay Rastogi, IIFT, New Delhi. 8