Random Variable

AAA

DEFINITION of 'Random Variable'

A variable whose value is unknown or a function that assigns values to each of an experiment's outcomes. Random variables are often designated by letters and can be classified as discrete, which are variables that have specific values, or continuous, which are variables that can have any values within a continuous range.

INVESTOPEDIA EXPLAINS 'Random Variable'

Consider an experiment where a coin is tossed three times. If X represents the number of times that the coin comes up heads, then X is a discrete random variable that can only have the values 0,1,2,3 (from no heads in three successive coin tosses, to all heads). No other value is possible for X.


An example of a continuous random variable would be an experiment that involves measuring the amount of rainfall in a city over a year, or the average height of a random group of 25 people.




RELATED TERMS
  1. Discrete Distribution

    The statistical or probabilistic properties of observable (either ...
  2. Nonparametric Statistics

    A statistical method wherein the data is not required to fit ...
  3. Probability Distribution

    A statistical function that describes all the possible values ...
  4. Normal Distribution

    A probability distribution that plots all of its values in a ...
  5. Scenario Analysis

    The process of estimating the expected value of a portfolio after ...
  6. Premium to Surplus Ratio

    Net premiums written divided by policyholders’ surplus. The premium ...
Related Articles
  1. Can something as simple as a coin toss be effectively applied to the market?
    Investing Basics

    What Are The Odds Of Scoring A Winning Trade?

    Just because you're on a winning streak doesn't mean you're a skilled trader. Find out why.
  2. The debate between those who believe in an efficient market and those who believe that the markets follow a somewhat cyclical path will likely continue for the foreseeable future.
    Fundamental Analysis

    Financial Markets: Random, Cyclical Or Both?

    Are the markets random or cyclical? It depends on who you ask. Here, we go over both sides of the argument.
  3. Forex Education

    Trading With Gaussian Models Of Statistics

    The entire study of statistics originated from Gauss and allowed us to understand markets, prices and probabilities, among other applications.
  4. Trading Strategies

    What Your Trading Charts Aren't Telling You

    You may be missing some key statistics when following charts in the market.
  5. Economics

    How A Limited Government Affects A Country's Finances

    Countries with limited governments have fewer laws about what individuals and businesses can and can’t do. What's the net result?
  6. Personal Finance

    What is the average salary for an accountant?

    Learn about the average salaries of various accounting positions, and see the difference that an accounting degree makes in attaining higher wages.
  7. Fundamental Analysis

    Lognormal and Normal Distribution

    When and why do you use lognormal distribution or normal distribution for analyzing securities? Lognormal for stocks, normal for portfolio returns.
  8. Economics

    Is the Bureau of Labor Statistics accurate?

    Read this brief analysis of the accuracy of Bureau of Labor Statistics, including a summary of the types of reports issued and how they are compiled.
  9. Economics

    Where is cost of living lowest in the world?

    Learn how the cost of living is the lowest in India based on numbers derived from the CPI and organizations like Expatistan and Numbeo.
  10. Investing Basics

    How Does Goodwill Affect Financial Statements?

    Goodwill is a bit of a paradox--intangible, yet it is recorded as an asset on the purchasing company's balance sheet.

You May Also Like

Hot Definitions
  1. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  2. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  3. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  4. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
  5. Free Carrier - FCA

    A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. ...
  6. Law Of Supply And Demand

    A theory explaining the interaction between the supply of a resource and the demand for that resource. The law of supply ...
Trading Center