Joint Probability and Statistics-ECO6416

# Joint Probability and Statistics-ECO6416 - Joint...

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Joint Probability and Statistics A joint probability distribution of a group of random variables is the distribution of group of variables as a whole. Applied business statistics deal mostly with the joint probability distribution of two discrete random variables. The joint probability distribution of two discrete random variables is the likelihood of observing all combinations of the two variables. Joint Probability Function: Let us have two discrete random variables X and Y, taking values x i , i = 1,. ...,m, and y i , j = 1,. ....,n, respectively. The function: P X, Y = P X, Y (x, y) = P(X = x, Y = y) is called the joint probability function of the random variables X and Y. As an example, consider two competitive stocks (A, and B). Suppose the estimated rates of return of stocks A and B are given as follow (respectively): R A = [0.8, 1.0, 1.2], and R B = [0.9, 1.0, 1.1] The numbers in the body of the following table are the estimated probabilities of all possible combinations of two jointly probabilities of the two random variables R A

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Joint Probability and Statistics-ECO6416 - Joint...

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