Moments of Linear Combinations

If we have more than two random variables, X1,X2,…,Xn, for constants a:

E(∑i=1naiXi)=∑i=1naiE(Xi)

E(X+4Y+2Z)=E(X)+4E(Y)+2E(Z)

var(∑i=1naiXi)=∑i=1nai2var(Xi)+2∑i=1n−1∑j=i+1naiaj⋅cov(XiXj)

Var(X+4Y+2Z)=Var(X)+16Var(Y)+4Var(Y)+2(1)(4)cov(X,Y)+2(1)(2)cov(X,Z)+2(4)(2)cov(Y,Z)

Covariances of Linear Combinations

If

Y1=∑i=1naiXiand Y2=∑i=1nbiXi

then

cov(Y1,Y2)=∑i=1naibi⋅Var(Xi)+∑i=1n−1∑j=i+1n(aibj+ajbi)⋅cov(Xi,Xj)cov(X+4Y+2Z,3X−Y−Z)=(1)(3)Var(X)+4(−1)Var(Y)+2(−1)Var(Z)++[(1)(−1)cov(X,Y)+4(3)cov(X,Y)]++[(1)(−1)cov(X,Y)+(2)(3)cov(X,Z)]++[4(−1)cov(Y,Z)+2(−1)cov(Y,Z)]