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Old 06-22-2018, 10:15 AM
ericp ericp is offline
Join Date: Aug 2007
Posts: 283
Default Variance Question

I've seen the empirical variance expressed two different ways and I don't understand when to use which.

i. Var = F*S/N
ii. Var = F*S*N

The later looks like the variance of a binomial which makes sense to me in situations where we want, say, the number of data points below a value, like F(1500). However, this is exactly the case in SOA #227, yet the solution uses the former (i). I don't understand why.

If we wanted the variance of F(1500) why wouldn't it be:
# pts below 1500/ N * # pts above 150 / N * N - because this would be variance of a binomial with F = p and S = (1-p) * N.

When finding variance of grouped data, specifically, when the value we want is within a group, we use ii. Yet, in the simulation section we write the variance as in i.

Can someone explain simply what the difference is or why we use one or the other?
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