This Expected Value calculator calculates the expected value, or the mean in advance, of a number set or group of numbers. Expected Value for a Discrete Random Variable. E(X)=\sum x_i p_i. x_i= value of the i th outcome p_i = probability of the i th outcome. According to this formula. Identify all possible outcomes. Calculating the expected value (EV) of a variety of possibilities is a statistical tool for determining the most likely result over time. We will look at both the discrete and continuous settings and see the similarities and differences in the formulas. Expected value formula for continuous random variables. The formula changes slightly according to what kinds of events are happening. The property is as follows: It includes the construction of a cumulative probability distribution and the calculation of the mean and standard deviation. What is the 'Expected Value' The expected value EV is an anticipated value for a given investment. Search Course Materials Faculty login PSU Access Account. Identify all possible outcomes. Adding 3 and 4 gives us the expected value: For instance, if you play the game times, win 50 times and lose the remaining 50, then your average winning is equal to the expected value: Statements, proofs and examples of the main properties of the expected value operator. The interpretation is that if you play many times, the average outcome is losing 17 cents per play. Notice in the summation part of this equation that we only square each observed X value and not the respective probability. The expected value of this scenario is:. To find the partial value due to each outcome, multiply the value of the outcome times its probability. Example Let be a random variable with support and distribution function Its expected value is. We then add these products to reach our expected value. Dictionary Term Of The Day. Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. Back to Top Find an Expected Value in Excel Step 1: When the first roll is below 3. Definition informal The expected value of a random variable is the weighted average of the values that can take on, where each possible value is weighted by its respective probability. What is the 'Expected Value' The expected value EV is an anticipated value for a given investment. De verwachtingswaarde berekenen Discuss Print Email Edit Send fan mail to authors.