Question

Derive expressions for the means and variances of the following linear combinations in terms of the means and covariances of the random variables X1, X2, and X3. (a) X1 - 2X2 (b) X1 + 2X2 - 3 (C) 3X1 - 4X2 if X1 and X, are independent (So, 012 = 0).

Answer 1

Means and Variances of Linear Combinations:


(a) X1 - 2X2

Mean: μa = μ1 - 2μ2

Variance: σa2 = σ12 + 4σ22 + 4σ122



(b) X1 + 2X2 - 3

Mean: μb = μ1 + 2μ2 - 3

Variance: σb2 = σ12 + 4σ22 + 4σ122



(c) 3X1 - 4X2

Mean: μc = 3μ1 - 4μ2

Variance: σc2 = 9σ12 + 16σ22



In the case that X1 and X2 are independent, then σ122 = 0, so:

(a) X1 - 2X2

Mean: μa = μ1 - 2μ2

Variance: σa2 = σ12 + 4σ22



(b) X1 + 2X2 - 3

Mean: μb = μ1 + 2μ2 - 3

Variance: σb2 = σ12 + 4σ22



(c) 3X1 - 4X2

Mean: μc = 3μ1 - 4μ2

Variance: σc2 = 9σ12 + 16σ22