maths.

org/step

STEP Support Programme

STEP III Statistics Topic Notes

Algebra of Expectations

Not in the formula book (X, Y do not have to be independent for the first one):
• E(aX + bY + c) = aE(X) + bE(Y ) + c

• Var(aX + b) = a2 Var(X)

In the formula book!

If X and Y are independent random variables:

• E(XY ) = E(X)E(Y )

• Var(aX ± bY ) = a2 Var(X) + b2 Var(Y )

Covariance (all of these are in the formula book!)

 
• Cov(X, Y ) = E (X − µX )(Y − µY ) = E(XY ) − µX µY

• Var(aX ± bY ) = a2 Var(X) + b2 Var(Y ) ± 2abCov(X, Y )

• If X = aX 0 + b and Y = cY 0 + d then Cov(X, Y ) = ac Cov(X 0 , Y 0 ))

Cov(X, Y )
• Product moment correlation coefficient ρ =
σX σY

2 = Var(X) etc. Note that if X and Y are independent then Cov(X, Y ) = 0.

µX = E(X), σX

Distribution functions

The probability distribution function is also called the probability density function.

There are lots of formulae on pages 7 & 8 of the formulae book!

If you are given the probability distribution function of X, then you can find the distribution func-
tion of related random variables, such as Y = X 2 . You do this via the cumulative distribution
function, e.g.:

FY (y) = P(Y 6 y)
= P(X 2 6 y)
√
= P(X 6 y)
Z √y
= f(t) dt
−∞

The lower limit might be 0 or something else depending on how X is distributed.

Once you have the C.D.F. for Y you can differentiate (with respect to y) and hence find the P.D.F.

STEP III Statistics: Topic Notes 1

 [Link]/step

Probability Generating Functions (Discrete Random Variables)

The probability generating function of X is GX (t) = E(tX ), so if the random variable takes integer
values greater than or equal to 0 we have:

GX (t) = P(X = 0) × t0 + P(X = 1) × t1 + P(X = 2) × t2 + · · · .

We have GX (1) = 1 as this is the sum of all the possible probabilities. The probability P(X = r)
is the coefficient of tr in the P.G.F. expansion.

Differentiating with respect to t gives:

G0X (t) = 0 × P(X = 0) + 1 × P(X = 1) + 2 × P(X = 2) × t + 3 × P(X = 3) × t2 + . . .

and substituting t = 1 gives G0X (1) = E(X).

Differentiating again and substituting t = 1 gives

G00X (1) = 2 × P(X = 2) + 3 × 2 × P(X = 3) + 4 × 3 × P(X = 4) + . . ..

Adding together G00X (1) and G0X (1) gives:

G0X (1) + G00X (1) = P(X = 1)+2 × P(X = 2) + 3 × P(X = 3) + 4 × P(X = 4) + . . .

+2 × P(X = 2) + 3 × 2 × P(X = 3) + 4 × 3 × P(X = 4) + . . .
= P(X = 1)+22 × P(X = 2) + 32 × P(X = 3) + 42 × P(X = 4) + . . .
2
Hence G00X (1) + G0X (1) = E(X 2 ) and so Var(X) = G00X (1) + G0X (1) − G0X (1) .


These formulae, and the generating functions for Binomial, Poisson and Geometric distributions
are given in the formula book.

Moment Generating Functions (Continuous Random Variables)

The M.G.F. of a continuous random variable with P.D.F. f(x) is:

Z
MX (t) = E(e ) = f(x)etx dx .
tX

Z
Substituting t = 0 gives MX (0) = f(x)dx = 1.

Differentiating with respect to t gives:

Z Z
0 d tx
MX (t) = f(x) × e dx = f(x)xetx dx .
dt
Z
Substituting t = 0 gives M0X (0) = f(x) × xdx = E(X).

In a similar way you can differentiate with respect to t again and show that M00X (0) = E(X 2 ) and
2
hence Var(X) = M00X (0) − M0X (0) .


These formulae and the M.G.F.’s for the Uniform, Exponential and Normal distributions are given
in the formula book.

STEP III Statistics: Topic Notes 2

 [Link]/step

Sampling

If n independent observations, X1 , X2 , . . ., Xn are made from a distribution with mean µ and

2
variance σ 2 then the sample mean, X̄ has E(X̄) = µ and Var(X̄) = σn . When n (the sample size)
is “Large” the Central
 Limit Theorem says that the sample mean, X̄, is approximately normal,
σ2
i.e. X̄ ≈ ∼N µ, n no matter what distribution X has.

Geometric Distribution

The Geometric distribution models the number of trials needed up to and including the first “suc-
cess”. It has one parameter, p, the probability of success. It is not on all A-level specifications, but
does sometimes appear in STEP questions.

For example, X could be the number of rolls of a dice until a six is rolled. Then the probability of
success is p = 16 and X ∼Geo 16 .

The probability of a six occurring on the rth roll (and not before) is P(X = r) = (1 − p)r−1 p =
5 r−1 1 th roll).



6 6 (as the first r − 1 rolls are all “not sixes” followed by a six on the r

Writing q = 1 − p we have:

P(X = 1) + P(X = 2) + P(X = 3) + P(X = 4) + . . . = p + qp + q 2 p + q 3 p + . . .

= p 1 + q + q2 + q3 + . . .

1
=p× Sum of a infinite GP
1−q
1
=p× =1 as expected!
p

To find the expectation we want to find:

E(X) = P(X = 1) + 2P(X = 2) + 3P(X = 3) + 4P(X = 4) + . . .

= p + 2qp + 3q 2 p + 4q 3 p + . . .
= p 1 + 2q + 3q 2 + 4q 3 + . . . .

This looks a lot like a derivative! Starting with 1 + q + q 2 + q 3 + q 4 + . . . = (1 − q)−1 we can

differentiate with respect to q to get:

0 + 1 + 2q + 3q 2 + 4q 3 + . . . = (1 − q)−2 (*)

1 p
We then have E(X) = p × (1−q)2
= p2
= p1 .

To find Var(X) start by differentiating (∗) to get:

2 + 3 × 2q + 4 × 3q 2 + 5 × 4q 3 + . . . = 2(1 − q)−3 (†)

Then (†) − (∗) gives:

2 1 2−p
1 + 2 × 2q + 3 × 3q 2 + 4 × 4q 3 + . . . = 3
− 2 = .
p p p3

STEP III Statistics: Topic Notes 3

 [Link]/step

2−p
Hence E(X 2 ) = p + 22 qp + 32 q 2 p + 42 q 3 p + · · · = p2
and
2
Var(X) = E(X 2 ) − E(X)

 2
2−p 1
= 2
−
p p
1−p
=
p2

STEP III Statistics: Topic Notes 4