STAT 100 Chapter 20: Chapter 20 STATS.docx

• School: Simon Fraser University
• Department: Statistics
• Course: STAT 100
• Professor: Derek Bingham

Document Summary

The expected value of a random phenomenon that has numerical outcomes is found by multiplying each outcome by its probability and then adding all the products. Expected value = a1p1 + a2p2+ +akpk. An expected value is an average of the possible outcomes, but it is not an ordinary average in which all outcomes get the same weight. The idea of expected value as an average applies to random outcomes other than games of chance. It is used to describe the uncertain return from buying stocks or building a new factory. According to the law of large numbers, if a random phenomenon with numerical outcomes is repeated many times independently, the mean of the actually observed outcomes approaches the expected value. In many independent repetitions, the proportion of each possible outcome will be close to its probability, and the average outcome obtained will be closed to the expected value (express the long-run regularity of chance events)