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Central limit theorems

for variances and correlation coe¢ cients


E. Omey and S. Van Gulck
HUB –Stormstraat 2, 1000 - Brussels, Belgium
{edward.omey, stefan.vangulck}@hubrussel.be
March 2008

Abstract

In many texbooks, the central limit theorem playes a prominent role. In


studying con…dence intervals for the mean for example, the use of the central
limit theorem is fully exploited. For large samples from an arbitrary distribution
with …nite second moment, we can always construct con…dence intervals and test
hypothesis concerning . In the same textbooks, in the treatment of the variance
2
and the correlation coe¢ cient , the analysis is usually restricted to samples
from normal distributions!
In this paper we give a general and simple central limit appraoch to these
parameters and show that it is convenient but not necessary to restrict attention
to normal samples. Among others we discuss central limit theorems for the
sample variance s2 , the sample correlation coe¢ cient r and the ratio of sample
variances s22 =s21 for paired and for unpaired samples.

1
1 Introduction
Let X1 ; X2 ; :::; Xn denote a sample from X s A( ; 2 ), where A is an arbitrary
distribution with = E(X) and 2 = V ar(X). The sample mean is given by
n
1X
X= Xi .
n i=1

It is well known that E(X) = and that V ar(X) = 2 =n. To calculate


probabilities concerning X is a more complicated problem. For small samples
there are not many distributions for which the distribution of X is known. For
large samples we can use the central limit theorem. The central limit theorem
for X states that as n ! 1, we have
p X d
n =) Z s N (0; 1),

i.e. we have
p X
P( n x) ! P (Z x).

We use the notation X t N ( ; 2 =n). In many cases this approximation works


su¢ ciently well.
The sample variances are given by
n
1X
S2 = (X )2 = (Xi )2 ,
n i=1
n n 2
s2 = (X X)2 = (X 2 X ).
n 1 n 1
It is well known that E(S 2 ) = E(s2 ) = 2
. For the variance, we …nd that
1
V ar(S 2 ) = V ar((X )2 ).
n
To calculate the variance of s2 is, in general, much more complicated. For a
sample from the normal distribution N ( ; 2 ) there are no problems. In this
case we have
nS 2 2 (n 1)s2
2
s n , 2
s 2n 1
and for large n we have
2 4 2 4
S2 t N ( 2
), s2 t N ( 2 ;
; ).
n n 1
In the case of a sample from another distribution, these approximations are
usually not valid. In section 2 of this paper, we provide a central limit theorem
for S 2 and for s2 .
In section 3 we state and prove a multivariate central limit theorem and
then apply a tranfer theorem to obtain central limit theorems for the sample
coe¢ cient of variation CV , the sample correlation coe¢ cient r and the ratio of
sample variances.

2
2 Central Limit Theorem for S 2 and s2
2.1 Central limit theorem for S 2
In view of the de…nition of S 2 , using the ordinary central limit theorem, we
immediately obtain the following result.

Theorem 1 If X1 ; X2 ; :::; Xn is a sample from X where E(X 4 ) < 1, then


p
P ( n(S 2 2
) x) ! P (U x)
2 2
where U s N (0; U) with U = V ar((X )2 ).

Proof. Apply the central limit theorem to Yi = (Xi )2 .

2
Remark. Note that U is related to the kurtosis (X) of X. Recall that
the kurtosis is de…ned as:
E((X )4 ) V ar((X )2 )
(X) = 4
3= 4
2.

2 4
We …nd that U = ( (X) + 2) .

2.2 Central limit theorem for s2


To prove a central limit theorem for s2 , we rewrite s2 as follows. We have
n
X
(n 1)s2 = (Xi (X ))2
i=1
n
X n
X
= (Xi )2 + n(X )2 2(X ) (Xi )
i=1 i=1
2
= nS n(X )2

It follows that

p
p n p n n p
n(s2 2
)= n(S 2 2
)+ 2
n(X )2 (1)
n 1 n 1 n 1
We prove the following result.

Theorem 2 If X1 ; X2 ; :::; Xn is a sample from X where E(X 4 ) < 1, then


p
P ( n(s2 2
) x) ! P (U x)
2 2
where U s N (0; U) with U = V ar((X )2 ).

3
p
Proof. Consider (1) and write n(s2 2
) = A + B, where
n p
An = n(S 2 2
),
n 1
p
n 2 n p
Bn = n(X )2 .
n 1 n 1
Using Theorem 1, we have

P (An x) ! P (U x).

For the second term we have


p
n 2 n p
Bn = n(X )(X ).
n 1 n 1
Using the central limit theorem we have
p
P ( n(X )= x) ! P (Z x)
P P
and the law of law numbers gives X ! 0. It follows that Bn ! 0. The
result now follows.
Remarks.
d
1) In the previous result we used the following property: if Xn =) X and
P d
Yn ! 0, then Xn + Yn =) X.
2) In section 4.1 we provide another proof of this result.
3) We …nd con…dence intervals for 2 in the usual way. We have
2 U
= s2 z =2 p
n
2 4
and using U = ( (X) + 2) we …nd that

2 s2
= p .
1 z =2 ( (X) + 2)=n

In applications, we replace (X) by the sample kurtosis b.

2.3 Special cases


1) If X s N ( ; 2 ) ,we have E((X )3 ) = 0 and E((X )4 ) = 3 4
and then
2 4
it follows that U = 2 . We …nd back the known result.
2) If X s BERN (p), then = p and, using q = 1 p, we have

E((X )4 ) = p4 q + q 4 p = pq(1 3pq)

Now we …nd that 2U = pq(1 4pq). Note that for p = 1=2 we have 2U = 0.
3) If X s U N IF ( a; a), we have = 0, 2 = a2 =3 and E(X 4 ) = a4 =5. We
…nd that p 2
n(s a2 =3) =) U s N (0; a4 =5).

4
3 Multivariate central limit theorem
3.1 The central limit theorem
We prove the following theorem.

Theorem 3 Let (X1 ; Y1 ); (X2 ; Y2 ); :::; (Xn ; Yn ) denote a sample


Pn from a bivari-
2 2 1
ate distribution
Pn (X; Y ) s A( 1 ; 2 ; 1 ; 2 ; ). Let X = n i=1 Xi and Y =
n 1 i=1 Yi . Then we have
p p
P ( n(X 1) x; n(Y 2) y) ! P (U x; V y)
2 2
where (U; V ) has a bivariate normal distribution (U; V ) s BN (0; 0; 1; 2; ).

Proof. For arbitrary a and b where (a; b) 6= (0; 0), we consider aX +bY . Clearly
we have

E(aX + bY ) = a 1 + b 2,
V ar(aX + bY ) = a2 21 + b2 22 + 2ab 1 2.

Using the ordinary central limit theorem, we obtain that


p d
n(aX + bY a 1 b 2) =) W

where
W s N (0; a2 2
1 + b2 2
2 + 2ab 1 2 ).

Clearly this limit can be identi…ed as follows: we have


d
W = aU + bV
2 2
where (U; V ) has a bivariate normal distribution (U; V ) s BN (0; 0; 1; 2; ).
The result now follows from the Cramer-Wold device.

Remark. The Cramer-Wold device states that for random vectors (Xn ; Yn )
we have
d
(Xn ; Yn ) =) (U; V )
if and only if
d
8(a; b) 6= (0; 0) : aXn + bYn =) aU + bV .
This device is easy to prove by using generating functions or characteristic
functions.

For random vectors with 3 or more components, we have a similar result


with a similar proof.

5
Theorem 4 Let (X1;j ; :::; Xk;j ), j = 1; 2; :::; n, denote a sample from a multi-
variate distribution (X1 ; X2 ; :::; Xk ) s A with means E(Xi ) = i and variance-
covariance matrix = (cov(Xi ; Xj ))ki;j=1 . For each i = 1; 2; :::; k, let X i =
P n
n 1 j=1 Xi;j . Then we have
p p p
P ( n(X 1 1) x1 ; n(X 2 2) x2 ; :::; n(X k k) xk )
! P (U1 x1 ; U2 x2 ; :::; Uk xk )
where (U1 ; U2 ; :::; Uk ) has a multivariate normal distribution with E(Ui ) = 0 and
Cov(Ui ; Uj ) = i;j .
The following corollary will we be useful.
Corollary 5 (5) Let (X1 ; Y1 ); (X2 ; Y2 ); :::; (Xn ; Yn ) denote a sample from a bi-
variate distribution (X; Y ) s A( 1 ; 2 ; 21 ; 22 ; ) and suppose that E(X 4 +Y 4 ) <
1. Consider the vectors
!
A = (X; Y ; X 2 ; Y 2 ; XY ),
! = ( ; ; E(X 2 ); E(Y 2 ); E(XY )).
1 2

Then p ! !) ! ! !
P ( n( A x ) ! P (V x ),
!
where V has a multivariate normal distribution with means 0 and with variance-
covariance matrix given by
0 2 1
1 Cov(X; Y ) Cov(X; X 2 ) Cov(X; Y 2 ) Cov(X; XY )
B 2
Cov(Y; X 2 ) Cov(Y; Y 2 ) Cov(Y; XY ) C
B 2 C
B 2
V ar(X ) Cov(X ; Y ) Cov(X 2 ; XY ) C
2 2
(2)
B C
@ V ar(Y 2 ) Cov(Y 2 ; XY ) A
V ar(XY )

3.2 Functions
Using the notations of Theorem 3, let us consider a new random variable
f (X; Y ), where the function f (x; y) is su¢ ciently smooth. Writing the …rst
terms of a Taylor expansion, we have
f f 1
f (x; y) = f (a; b) + (a; b)(x a) + (a; b)(y b) + R
x y 2
where the remainder term R is of the form
fx;x ( ; ) fx;y ( ; ) x a
R = (x a; y b) .
fx;y ( ; ) fy;y ( ; ) y b
Here the fa;b denote the second partial derivatives of f , and (resp. ) is
between x and a (resp. y and b). If these partial derivatives are bounded
around (a; b), for some constant c > 0 we have
jRj c((x a)2 + (y b)2 + j(x a)(y b)j).

6
Furthermore, if jx aj and jy bj , we …nd that
f f 2
f (x; y) f (a; b) (a; b)(x a) (a; b)(y b) 3c
x y
and hence also that
2 f f
3c + (a; b)(x a) + (a; b)(y b)
x y
f (x; y) f (a; b)
2 f f
3c + (a; b)(x a) + (a; b)(y b)
x y
Now replace (x; y) and (a; b) by (X; Y ) and ( 1; 2) and de…ne the following
quantities:
! f f
= ( 1; 2) =(
( ; ); ( 1; 2 )),
x 1 2 y
p p
An = 1 n(X 1 ) + 2 n(Y 2 ),
p
Kn = n(f (X; Y ) f ( 1 ; 2 )).
Note that Theorem 3 implies that P (A(n) x) ! P (W x) = P ( 1 U + 2V
x).
If X 1 and Y 2 , the previous analysis shows that
p p
3c n 2 + An Kn 3c n 2 + An
Now consider P (Kn x) and write P (Kn x) = I + II, where
I = P (Kn x; E),
II = P (Kn x; E c ),
where E is the event E = X 1 and Y 2 , and E c its com-
plement.
We have II P (E c ) P( X 1 > ) + P( Y 2 > ). Using the
inequality of Chebyshev, we obtain that
2 2
1 + 2
II .
n 2
If we choose such that n 2 ! 1, we obtain that II ! 0.
For I, we have
p p
I P ( 3 nc 2 + A(n) x; E) P (A(n) x + 3 nc 2 ).
p
If we choose such that n 2 ! 0, we …nd, after taking limits for n ! 1,
that I is bounded from above by P (W x). A good choice of is for example
= n 1=3 . On the other hand, we have
p
I P (3 nc 2 + A(n) x; E)
p p
= P (3 nc 2 + A(n) x) P (3 nc 2 + A(n) x; E c )

7
p
As before, we have P (3 nc 2 + A(n) x) ! P (W x). For the other term,
we have p
P (3 nc 2 + A(n) x; E c ) P (E c ) ! 0.
We obtain that as n ! 1, I is bounded from below by P (W x). We conclude
that
P (Kn x) ! P (W x).
Clearly we have E(W ) = 0 and for the variance we …nd that

2 1 ! !T
W = V ar(W ) = ( 1; 2) = .
2

where
V ar(X) Cov(X; Y ))
= .
Cov(X; Y ) V ar(Y )
This approach can also be used for random vectors with 3 or more components.
The general result is the following.

Theorem 6 Using the notations of Theorem 4, if f is su¢ ciently smooth, we


have p !
P ( n(f ( A ) f (!)) x) ! P (W x)
d Pk ! !T
where W = i=1 i Ui s N (0; 2W ) with i = ( f = xi )(!) and 2W = .

Remark. We can also consider vectors of functions.


If (f1 (!
x ); f2 (!
x ); :::; fm (!
x )), is such a vector, it su¢ ces to consider linear
combinations of the form

h(!
x ) = u1 f1 (!
x ) + u2 f2 (!
x ) + ::: + um fm (!
x)

where (u1 ; u2 ; :::; um ) 6= (0; 0; :::; 0). Now Theorem 6 and the Cramer-Wold
device can be used.

4 Variance and coe¢ cient of variation


4.1 The sample variance s2
!
Here is another proof of Theorem 2. Consider the vectors A = (X; X 2 ), ! =
!
( ; E(X 2 ) and the function f (x; y) = y x2 . In this case we …nd f ( A ) =
!
(n 1)s2 =n and f ( ) = 2 . Using ( 1 ; 2 ) = ( 2 ; 1) it follows from Theorem
6 that
p n 1 2 2
P ( n( s ) x) ! P (W x),
n

8
2
where W s N (0; W) with

2 V ar(X) Cov(X; X 2 ) 2
= ( 2 ; 1) 2
W Cov(X; X ) V ar(X 2 ) 1
= 4 2 V ar(X) 4 Cov(X; X 2 ) + V ar(X 2 )
= V ar(X 2 2 X)
= V ar((X )2 )

We can easily replace (n 1)s2 =n by s2 to …nd back Theorem 2.

4.2 The sample coe¢ cient of variation


In probability theory and statistics, the coe¢ cient of variation (CV ) is a nor-
malized measure of dispersion of a probability distribution. It is de…ned as the
ratio of the standard deviation to the mean: CV = = . This is only de…ned
for non-zero mean , and is most useful for variables that are always positive.
The sample coe¢ cient of variation is given by
s
SCV = .
X
a:s:
If 6= 0, we have X ! 6= 0 and SCV is well-de…ned a:s:.Now we consider
!
the vectors A = (X; X 2 ), ! = ( ; E(X 2 ) and the function
p
y x2
f (x; y) = .
x
It is easy to see that f (!) = CV and that
r
! n 1
f(A) = SCV .
n
Straightforward calculations show that

E(X 2 ) 1
( 1; 2) =( 2
; ).
2
Using Theorem 6, we …nd that
r
p n 1
P ( n( SCV CV ) x) ! P (W x).
n
2
where W s N (0; W) with

2 ! V ar(X) Cov(X; X 2 ) !T
= 2
W Cov(X; X ) V ar(X 2 )
E 2 (X 2 ) E(X 2 ) 1
= 4 3 2
Cov(X; X 2 ) + 2 2
V ar(X 2 ).
4

9
To simplify, note that

E((X )3 ) = Cov(X; X 2 ) 2 2
,
V ar((X )2 ) = V ar(X 2 ) + 4 2 2
4 Cov(X; X 2 )

Now we …nd

2 E 2 (X 2 ) E(X 2 ) 4
W = 4
( 3 2 2 2
)(E((X )3 ) + 2 2
)
4
1
+ 2 2
(V ar((X )2 ) 4 2 2
)
4
2 2 2 2
( + ) 1 2 1
= 4 3
E((X )3 ) 2
+ 2 2
V ar((X )2 ) 1
4
4
1 1
= 4 3
E((X )3 ) + 2 2
V ar((X )2 ).
4
3
In terms of kurtosis (X) and skewness 1 (X) = E((X )3 ), we …nd that
4 3 2 2
2
W = 4 3 1 (X) + 2
(X) + 2
.
4 2
Remarks.
1) In the case of a normal distribution, we …nd that
4 2
2 1
W = 4
+ 2
= CV 4 + CV 2 .
2 2

In other cases, we see that 2W is in‡uenced by (X) and 1 (X).


2) In the case of an exponential distribution with parameter , we have

= = 1= , 1 = 2, =6

and then CV = 2W = 1.
3) For the Poisson( )-distribution, we have
2 1=2 1
= = , 1 = , =
1=2
and then CV = and

2 1 1
W = + 2.
2 4

4.3 The case =0


If = 0, then CV is not de…ned but we can always calculate

1 X
= .
SCV s

10
P
If 2 < 1, the central limit theorem together with s2 ! 2
shows that we
have p
n p X d
= n =) Z
SCV s
where Z s N (0; 1). Now note that for x > 0, we have
p
n SCV 1
P( > x) = P ( p < ),
SCV n x
p
n SCV 1
P( < x) = P ( p > ).
SCV n x

As a consequence, we have
SCV d 1
p =) U = .
n Z

The reader can check that U has a (symmetric) density given by


1 1 1 1
fU (u) = 2
fZ ( ) = 2 p exp( ).
u u u 2u2
2
From this it follows that E(U ) = 0 and U = 1.

4.4 A t-statistic
In the place of SCV we can study T = 1=SCV = X=s. This is a quantity
related to the t-statistic t = (X )=s. As in section 4.2, we obtain that
p d
n(T ) =) W

2
where W s N (0; U) where
4 3 2 2
2 2
U = 4 W =1 3 1 (X) + 2
(X) + 2
.
4 2
Note that for the t-statistic, we have the simpler result that

p X d
n =) Z s N (0; 1).
s

4.5 The sample dispersion


Another related statistic is related to the dispersion D = 2 = . This measure is
well de…ned for 6= 0 and can D be used for example to compare distributions
with di¤erent means. The corresponding sample dispersion is given by

s2
SD = .
X

11
!
To study SD, we consider A = (X; X 2 ), ! = ( ; E(X 2 )) and the function
2
f (x; y) = (y x )=x. Clearly we have
! n 1
f(A) = SD,
n
!
f ( ) = D,
! 2
1
= ( 2
2; ).

It readily follows that


p d
n(SD D) =) W
2
where W s N (0; W) with
2 2
W = V ar( 1X + 2X )
2 4 3
2
= ( 2
( (X) + 2) + 4
2 3 1 (X)).

In the case of a normal distribution, we …nd that


2 2
2 2
W = 2
(2 + 2
).

If = 0, we obtain …rst that


p 1 p X d 1
n = n 2 =) 2 Z,
SD s
where Z s N (0; 1), and then it follows as in section 4.3. that
1 d 2 1
p SD =) .
n Z

5 Sample covariance and correlation


5.1 The sample covariance
!
Consider the vector A = (X; Y ; XY ), ! = ( 1; 2 ; E(XY )) and let f (x; y; z) =
z xy. In this case we …nd
!
f ( A ) = XY X Y
f (!) = Cov(X; Y )

and
!
=( 1; 2 ; 1)

It follows that
p !
P ( n(f ( A ) Cov(X; Y )) x) ! P (W x)

12
2
where W s N (0; W) and
0 1
V ar(X) Cov(X; Y ) Cov(X; XY )
!@ !
2
W = Cov(X; Y ) V ar(Y ) Cov(Y; XY ) A t
Cov(X; XY ) Cov(Y; XY ) V ar(XY )
!
Assuming …rst for simplicity that 1 = 2 = 0, we …nd = (0; 0; 1) and
2
W = V ar(XY ). In the general case we …nd that
2
W = V ar((X 1 )(Y 2 )).

Remark. If X and Y are independent, we have


2 2 2 2 2
W = E((X 1 ) (Y 2) ) = 1 2.

5.2 The sample correlation coe¢ cient


2 2
For a sample (X1 ; Y1 ); (X2 ; Y2 ); :::; (Xn ; Yn ) from (X; Y ) s A( 1; 2; 1; 2; ),
the sample correlation coe¢ cient is de…ned as
n XY X Y
r= . (3)
n 1 s1 s2
For n ! 1, a rough estimate gives
E(XY ) E(X)E(Y )
rt = ,
1 2

so that r is an approximation of . As in Corollary 5, we consider the vectors


!
A = (X; Y ; X 2 ; Y 2 ; XY ),
! = ( ; ; E(X 2 ); E(Y 2 ); E(XY ))
1 2

and the function


e ab
f (a; b; c; d; e) = p
(c a2 )(d b2 )
!
Now we …nd f (!) = , f ( A ) = r, and the derivatives:
f b (e ab)a
= p + p
a (c a2 )(d b2 ) (c a2 ) (c a2 )(d b2 )
f a (e ab)b
= p + p
b (c a2 )(d b2 ) (d b2 ) (c a2 )(d b2 )
f 1 (e ab)
= p
c 2 (c a2 ) (c a2 )(d b2 )
f 1 (e ab)
= p
d 2 (d b ) (c a2 )(d
2 b2 )
f 1
= p
e (c a2 )(d b2 )

13
It follows that p
P ( n(r ) x) ! P (W x). (4)
! !t
where W s N (0; 2W ) and 2
W = with given in (2).
In this case we have

E(Y ) E(X) E(X) E(Y )


1 = + 2 , 2 = + 2 ,
1 2 1 1 2 2
1 1 1
3 = 2, 4 = 2, 5 = .
2 1 2 2 1 2
!
In the special case where 1 = 2 = 0 and 1 = 2 = 1, we …nd =
(0; 0; =2; =2; 1) and then we have
!
( )1 = Cov(X; X 2 ) Cov(X; Y 2 ) + Cov(X; XY )
2 2
!
( )2 = Cov(Y; X 2 ) Cov(Y; Y 2 ) + Cov(Y; XY )
2 2
!
( )3 = V ar(X 2 ) Cov(X 2 ; Y 2 ) + Cov(X 2 ; XY )
2 2
!
( )4 = Cov(X 2 ; Y 2 ) V ar(Y 2 ) + Cov(Y 2 ; XY )
2 2
!
( )5 = Cov(X 2 ; XY ) Cov(Y 2 ; XY ) + V ar(XY )
2 2
and then (recall that 1 = 2 = 0 and 1 = 2 = 1) we have:

! !t 2 2
2
W = = V ar(X 2 ) + Cov(X 2 ; Y 2 ) Cov(X 2 ; XY )
4 4 2
2 2
+ Cov(X 2 ; Y 2 ) + V ar(Y 2 ) Cov(Y 2 ; XY )
4 4 2
Cov(X 2 ; XY ) Cov(Y 2 ; XY ) + V ar(XY )
2 2
2
= V ar(X 2 ) + 2Cov(X 2 ; Y 2 ) + V ar(Y 2 )
4
(Cov(X 2 ; XY ) + Cov(Y 2 ; XY )) + V ar(XY )
2
= (E(X 4 ) 1 + 2E(X 2 Y 2 ) 2 + E(Y 4 ) 1)
4
(E(X 3 Y ) + E(XY 3 ) ) + E(X 2 Y 2 ) 2

2
= (E(X 4 ) + 2E(X 2 Y 2 ) + E(Y 4 ))
4
(E(X 3 Y ) + E(XY 3 )) + E(X 2 Y 2 )
In the general case, we …nd that
2
2
W = (E(X 4 ) + 2E(X 2 Y 2
) + E(Y 4
)) (5)
4
(E(X 3 Y ) + E(X Y 3
)) + E(X 2 Y 2
),

14
where
X E(X) Y E(Y )
X = and Y = .
1 2
2
The …nal result is that (4) holds with W given in (5).

Remarks.
2
1) We can rewrite W more compact as follows. Assuming standardized
variables, we have

2
2
W = V ar(X 2 ) + 2Cov(X 2 ; Y 2 ) + V ar(Y 2 )
4
(Cov(X 2 ; XY ) + Cov(Y 2 ; XY )) + V ar(XY )
2
= V ar(X 2 + Y 2 ) Cov(X 2 + Y 2 ; XY ) + V ar(XY )
4
= V ar( (X 2 + Y 2 ) XY )
2
2) Note that the asymptotic variance 2W only depends on and fourth-order
central moments of the underlying distribution.
3) If = 0, we …nd that 2W = E(X 2 Y 2 ).
4) If X and Y are independent, we have = 0 and 2W = E(X 2 Y 2 ) =
E(X 2 )E(Y 2 ) = 1.
5) If Y = a + bX, b > 0 we …nd = 1, Y = X and 2W = 0.

5.3 Application
To model dependence, one often uses a model of the following form. Starting
from arbitrary independent random variables A and B we construct the vector
(X; Y ) = (A; B + A). Given a sample (Xi ; Yi ) we want to test e.g. the
hypothesis H0 : = 0 versus Ha : 6= 0.
It is clear that
2 2
V ar(X) = X = A
2 2 2 2
V ar(Y ) = Y = B + A
2
Cov(X; Y ) = A
2
A
= (X; Y ) = q
2( 2 2 2
A B + A)

and we have = 0 if and only if = 0. Under H0 we have


p d
nr =) Z s N (0; 1).

15
5.4 The bivariate normal case
For a standard bivariate normal distribution (X; Y ) s BN (0; 0; 1; 1; ), we show
how to calculate 2W , cf. (5).
First note that (U; V ) = (X Y; Y ) also has a bivariate normal distribution
with
Cov(U; V ) = Cov(X; Y ) Cov(Y; Y ) = 0.
It follows that U and V are independent with V s N (0; 1) and U s N (0; 1 2 ).
For general W s N (0; 2 ), we have W (t) = exp 12 2 t2 and then E(W ) =
E(W 3 ) = 0 and E(W 2 ) = 2 , E(W 4 ) = 3 4 .
Now observe that Y = V and X = U + V . We …nd

E(Y 4 ) = E(X 4 ) = 3;
E(Y X 3 ) = E(Y 3 X) = E(V 3 U + V 4 ) = 3 ;
E(Y 2 X 2 ) = E(V 2 (U 2 + 2 U V + 2 V 2 ) = 1 + 2 2 ;

It follows that
2
2 2 2
W = (3 + 2 + 4 + 3) (3 + 3 ) + 1 + 2
4
4 2 2 2
= 2 + 1 = (1 )
2 2 2 2 2
In general, for (X; Y ) s BN ( 1; 2; 1; 2; ), we also …nd that W = (1 ) ,
and then
2 2
(1 )
r t N( ; )
n

5.5 The t and the F transformation


The approach of the previous section can now be used to construct con…dence
intervals for and to test hypothesis concerning .

5.5.1 Testing H0 : = 0 versus Ha : 6= 0


In the bivariate normal case it is often necessary to test H0 : = 0 versus
Ha : 6= 0. In the bivariate normal case, usually one uses the t-transformation:
x
t(x) = p .
1 x2
Observe that we have
1
t0 (x) = p
(1 x2 ) 1 x2
Under H0 we have t( ) = 0 and t0 ( ) = 1 and then the t transformation shows
that p d
n t(r) =) Z s N (0; 1).

16
Remark. Note that
r3
t(r) r= p p .
1 r2 (1 + 1 r2 )
Under H0 it follows that
d 1 3
n3=2 (t(r) r) =) Z .
2
For large samples it is not very useful to use the t-transformation.

5.5.2 Testing H0 : = 0 versus Ha : 6= 0

To test H0 : = 0 versus Ha : = 6 0 , where 0 6= 0, in the bivariate normal


case, usually one uses the Fisher F -transformation:
1 1+x
F (x) = ln( ).
2 1 x
In this case we have
1
F 0 (x) =
1 x2
The F transformation leads to the popular result that
p p
n(F (r) F ( )) t F 0 ( ) n(r )
so that p d
n(F (r) F ( )) =) Z s N (0; 1).
This approach can also be used in the case where 0 = 0.

5.6 Spearman’s rank correlation


To see whether or not two ordinal variables are associated, one can use Spear-
man’s rank correlation coe¢ cient rS . In this case we start from the sample of
ordinal variables (X1 ; Y1 ); (X2 ; Y2 ); :::; (Xn ; Yn ) and we assign a rank going from
1 to n. The smallest X value gets label 1, the next smallest X value gets label
2,..., the largest of the X values is labelled with rank n. In a similar way we
label the Y values. In the case of ties, we assign each variable the average of
the rankings, cf. the example below.
Starting from (X1 ; Y1 ); (X2 ; Y2 ); :::; (Xn ; Yn ), we thus obtain a sequence of
ranks (R1 ; R1 ); (R2 ; R2 ); :::; (Rn ; Rn ). The rank correlation rS is given by the
ordinary correlation coe¢ cient between the two rankings. We use the notation
rS = rS (X; Y ) = r(R; R ).
As before, we calculate rS by using the general formula (3) as before. Formula
(3) can be rewritten as
P
Ri Ri nR R
rS = q .
P 2 2 P 2
( Ri nR )( Ri 2 nR )

17
Now note that (with or without ties):
X X n(n + 1)
Ri = Ri = 1 + 2 + :: + n = .
2
If there are no ties, we also have:
X X n(n + 1)(2n + 1)
Ri2 = Ri 2 = 1 + 22 + ::: + n2 = ,
6
X 2 n(n + 1)(2n + 1) (n + 1)2 n(n2 1)
Ri2 nR = n =
6 4 12
1X n(n + 1)(2n + 1) X
(Ri Ri )2 = R i Ri .
2 6
In the case of no ties, after simplifying, we …nd that:
Pn
6 i=1 (Ri Ri )2
rS = 1 . (6)
n(n2 1)

For independent variables, we can use the result of section 5.2 to conclude that
p d
nrS =) Z s N (0; 1).

Remark. In the case of ties between variables, we assign each variable


the average of the rankings. Formula (5) to calculate rS should be modi…ed.
Consider the following example:

X Y R R R R (R R )2
3 10 1 1 0 0
6 15 2 2 0 0
9 30 3 4; 5 1; 5 2; 25
12 35 4 6 2 4
15 25 5 3 2 4
18 30 6 4; 5 1; 5 2; 25
21 50 7 8 1 1
24 45 8 7 1 1

P 2 P 2
InPthe case of no
P ties we had Ri = Ri = 204. In our example, we
have Ri2 = 204, Ri 2 = 203; 5. If there is 1 tie involving 2 observations, we
see that there is a di¤erence of 0; 5.

In general, one can proceed as follows. Let


t2 = the number of ties involving 2 observations;
t3 = the number of ties involving 3 observations;
...
tk = the number of ties involving k observations.

18
Now we calculate the correction factor
23 2 33 3 k3 k
T = t2 + t3 + ::: + tk
12 12 12
In the case of ties, we replace (6) by:
Pn
6(T + i=1 (Ri Ri )2 )
rS = 1 .
n(n2 1)

6 Comparing variances
Testing hypothesis concerning di¤erences between means is well known and can
be found in any textbook about statistics. Less is known about comparing
variances. In the case of unpaired samples from normal distributions, the dis-
tribution of the quotient of the sample variances s21 =s22 can be determined and
is related to an F -distribution. In general, the analysis of s21 =s22 is more compli-
cated. In this section we study s21 =s22 for large samples. We consider unpaired
samples as well as paired samples.

6.1 Unpaired samples


Suppose that we have unpaired samples X1 ; X2 ; :::; Xn from X s A( 1 ; 21 ) and
Y1 ; Y2 ; :::; Ym from Y s B( 2 ; 22 ). In order to test whether or not 22 = 21 one
can use a test based on s21 and s22 . We need the following lemma.
Lemma 7 Suppose that E(X 4 + Y 4 ) < 1. As n ! 1 and m ! 1, we have
p p
P ( n(s21 2
1) x; m(s22 2
2) y)
p 2 2
p 2 2
P ( n(s1 1) x)P ( m(s2 2) y) ! P (U1 x)P (U2 y),
2 2
where U1 s N (0; V ar(X 1) ) and U2 s N (0; V ar((Y 2 ) ).

Proof. This follows from independence and Theorem 2.

Now consider K de…ned by


2
2 s21
K= 2 1.
1 s22
Clearly we have
2 2 2 2 2 2
2 (s1 1) 1 (s2 2) Q
K= = .
s22 21 s22 21
Now we write
p
p 2
p p n
nQ = 2 n(s21 2
1)
2
1 m(s22 2
2) p .
m
Using the notations of Lemma 7 we have the following result.

19
Theorem 8 Suppose that E(X 4 + Y 4 ) < 1. If n ! 1 and m ! 1 in such a
way that n=m ! 2 (0 < 1), then
p d d 1 1
nK =) V = 2 U1 2 U2 ,
1 2
2
and V s N (0; V ) with

2 1 2 2 1 2
V = 4V ar((X 1) ) + 4V ar((Y 2 ) ). (7)
1 2

Proof. We clearly have


p d
nQ =) W ,
d 2 2 P
where W = 2 U1 1 U2 . Using s2i ! 2
i (i = 1; 2), it follows that
p d 1 d 1 1
nK =) 2 1W = 2 U1 2 U2
1 2 1 2

and the result follows.


Remarks.
1) If = 1, we can interchange the role of n and m.
2) From the practical point of view, we can use (7) to write
1 2 1 1 2 1 1 2
V t V ar((X 1) ) + V ar((Y 2 ) ).
n n 41 m 42
3) Note that the asymptotic variance depends on the kurtosis of the under-
lying distributions. We …nd that.
2 2
V = (X) + 2 + ( (Y ) + 2),

and then
1 2 1 1
V = ( (X) + 2) + ( (Y ) + 2)
n n m

4) In the special case of independent samples from normal distributions, we


p d
have nK =) V , where V s N (0; 2V ) with
2 2
V = V ar(X 2 ) + V ar(Y 2
),

where X and Y are the standardized X and Y . Using the expressions of


Section 5.3. we …nd that 2V = 2(1 + 2 ), and then
1 2 1 1
V t 2( + )
n n m
2 2 2
4) If 1 = 2 = , we can study the pooled variance given by:
(n 1)s21 + (m 1)s22
s2p = .
n+m 2

20
Now we …nd that
p
p n 1 p m 1 np
n(s2p 2
)=( ) n(s21 2
)+ p m(s22 2
)
n+m 2 n+m 2 m

It follows that
2
p d d
n(s2p 2
) =) W = 2 U1 + 2 U2
+1 +1
2
In this case W s N (0; W ), with
2
2
W =( 2 )2 V ar((X 2
1) ) +( 2 )2 V ar((Y 2
2 ) ).
+1 +1
2 2 2
In the case of samples from normal distributions with 1 = 2 = , we …nd
that
2
2 4
W = 2 ( 2 )2 + 2 4
( 2 )2
+1 +1
2
4 4 n
= 2 2 t2 .
1+ n+m

6.2 Paired samples


Let (X1 ; Y1 ); (X2 ; Y2 ); :::; (Xn ; Yn ) denote a sample from an arbitrary bivariate
distribution (X; Y ) s A( 1 ; 2 ; 21 ; 22 ; ). We prove the following result.

Lemma 9 If E(X 4 + Y 4 ) < 1, then


p p
P ( n(s21 2
1) x; n(s22 2
2) y) ! P (U1 x; U2 y).

where (U1 ; U2 ) has a bivariate normal distribution with zero means and with
variance-covariance matrix
2 2 2
V ar((X 1) ) Cov((X 1 ) ; (Y 2) )
2 2 2 .
Cov((X 1 ) ; (Y 2) ) V ar((Y 2) )

Proof. Take arbitrary real numbers (u; v) 6= (0; 0) and consider the vectors
!
A = (X; Y ; X 2 ; Y 2 ),
! = ( ; ; E(X 2 ); E(Y 2 )),
1 2

and the function f (a; b; c; d) = u(c a2 ) + v(d b2 ). Clearly we have


! 2 2
f(A) = u(X 2 X ) + v(Y 2 Y )
n 1
= (us21 + vs22 )
n

21
!
and f (!) = u 21 + v 22 . It is easy to see that = ( 2u 1 ; 2v 2 ; u; v). The
transfer results of section 3.2 show that
p !
P ( n(f ( A ) f (!)) x) ! P (W x),

2 2 ! !t
where W s N (0; W) with W = and
0 2
1
1 Cov(X; Y ) Cov(X; X 2 ) Cov(X; Y 2 )
B 2
Cov(Y; X 2 ) Cov(Y; Y 2 ) C
=B
@
2 C.
V ar(X 2 ) Cov(X 2 ; Y 2 ) A
V ar(Y 2 )

Straighforward calculations show that


! !t 2 2
= V ar(u(X 1) + v(Y 2 ) ).

It follows that
p n 1
P ( n( (us21 + vs22 ) (u 2
1 +v 2
2 )) x) ! P (W x),
n
d
where W = uU1 + vU2 , and (U1 ; U2 ) has the desired bivariate normal distribu-
tion. It is clear that the correction factor (n 1)=n is not important. The result
follows by using the Cramer-Wold-device. p
As in Theorem 8, we consider K and now we conclude that P ( nK x) !
P (V x), where
d 1 1
V = 2 U1 2 U2 .
1 2
2
We …nd that V s N (0; V ) with
2 2 2 2
2 V ar((X 1) V ar((Y 2) ) Cov((X 1 ) ; (Y 2) )
V = 4 + 4 2 2 2
2 2 1 2

Remarks
1) We can rewrite 2V more compact as follows. Using the notation X =
(X 1 )= 1 and Y = (Y 2 )= 2 we have

2
V = V ar(X 2 ) + V ar(Y 2
) 2Cov(X 2 ; Y 2
)
= V ar(X 2 Y 2 )
= E((X 2 Y 2 )2 )

2) If we start from a sample from a bivariate normal distribution, we …nd


(cf Section 5.3) that
2
V = E(X 4 ) + E(Y 4
) 2E(X 2 Y 2
) = 4(1 2
).

In the case of = 0 we …nd back the result of the unpaired case with = 1.

22
7 References
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