Lecture 6. E) Conditional Variance Identity

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Conditional Variance Identity

The CVI is useful identity (especially for later, when we discuss linear regression). It is the decomposition

[math]Var\left(X\right)=E\left[Var\left(X|Y\right)\right]+Var\left[E\left(X|Y\right)\right].[/math]

The interpretation for this equality will be clear when we discuss linear regression.