Expected Value - Uses and Applications

Uses and Applications

It is possible to construct an expected value equal to the probability of an event by taking the expectation of an indicator function that is one if the event has occurred and zero otherwise. This relationship can be used to translate properties of expected values into properties of probabilities, e.g. using the law of large numbers to justify estimating probabilities by frequencies.

The expected values of the powers of X are called the moments of X; the moments about the mean of X are expected values of powers of X − E. The moments of some random variables can be used to specify their distributions, via their moment generating functions.

To empirically estimate the expected value of a random variable, one repeatedly measures observations of the variable and computes the arithmetic mean of the results. If the expected value exists, this procedure estimates the true expected value in an unbiased manner and has the property of minimizing the sum of the squares of the residuals (the sum of the squared differences between the observations and the estimate). The law of large numbers demonstrates (under fairly mild conditions) that, as the size of the sample gets larger, the variance of this estimate gets smaller.

This property is often exploited in a wide variety of applications, including general problems of statistical estimation and machine learning, to estimate (probabilistic) quantities of interest via Monte Carlo methods, since most quantities of interest can be written in terms of expectation, e.g. where is the indicator function for set, i.e. .

In classical mechanics, the center of mass is an analogous concept to expectation. For example, suppose X is a discrete random variable with values x_i and corresponding probabilities p_i. Now consider a weightless rod on which are placed weights, at locations x_i along the rod and having masses p_i (whose sum is one). The point at which the rod balances is E.

Expected values can also be used to compute the variance, by means of the computational formula for the variance

A very important application of the expectation value is in the field of quantum mechanics. The expectation value of a quantum mechanical operator operating on a quantum state vector is written as . The uncertainty in can be calculated using the formula .