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Chapter 4: ProbabilityThe Study of Randomness

4.1 Randomness
A phenomenon is random if one outcome is uncertain, but there is a regular distribution of outcomes after many repetitions Probability proportion of times an outc0me would occur after many repetitions Independent outcome of one trial doesnt affect any other Sample Space S set of all possible outcomes of a random phenomenon Event outcome or set of outcomes of a random phenomenon (its a part of a sample space) Disjoint A and B have no outcomes in common (they cannot happen at the same time)

4.2 Probability Models

1. Any probability is a number between 0 and 1 ( ) 2. All possible outcomes together must have probability 1 ( ) 3. The probability that an event does not occur is 1 minus the probability it will occur ( ) ( ) 4. If two events have no outcomes in common, the probability that one or the other occurs is the sum of their individual probabilities. Addition rule for disjoint events: ( ) ( ) ( ) 5. Two events A and B are independent if knowing that one occurs does not change the probability that the other occurs. Multiplication rule for independent events: ( ) ( ) ( ) Probabilities in a finite sample space must add to 1 Benfords Law first digits of numbers in legitimate records often follow a distribution (see pg 292) Equally likely outcomes if a random phenomenon has k possible outcomes, all equally likely, then each outcome has probability 1/k ( )

4.3 Random Variables

Random variable variable whose value is a numerical outcome of a random phenomenon Discrete random variable has finite number of possible values o Every probability pi must Be between 0 and 1 Continuous random variable takes all values in a interval of numbers. The provability distribution of X is described by a density curve. The probability of any event is the area under the density curve and above the values of X that make up the event. o All continuous probability distributions assign probability 0 to every individual outcome Normal distributions are probability distributions

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4.4 Means and Variances of Random Variables

Mean the long run average of the probabilities o o The mean of a continuously random variable is the center of the distribution Law of Large Numbers As the number of observations increases, the mean of the observed values will approach eventually. Rules for Means o If X is a random variable and a and b are fixed numbers, then o If X and Y are random variables then Variance of a Discrete Random Variable ( ) o o Standard deviation of X is the square root of variance Rules for Variances o If X is a random variable and a and b are fixed numbers, then o If X and Y are independent random variables, then (addition rule for independent random variables) o If X and Y have correlation , then (general addition rule for variances of random variables)