Suppose A's income is 100 in the year 1, and his income is expected
to be anywhere between 110 and 120 in the year 2. What would be a
reasonable estimate of A's (expected) income variance from year 1 to
year 2? (Hey, not a homework question.)
At first, I thought I would calculate the variance from the pair of
numbers {100, 115} and take it as the income variance. (115 is the
median of 110 and 120, and I take it as a "reasonable" approximation
of the second year income.) However, I don't feel quite right about
this.
I am now thinking of taking the variances from the pairs {100, 120}
and {100, 110}, and then use the difference of the variances as my
answer to the question. Intuitively, the variance of {100, 110}
provides the lower bonds of A's income variance, and that of {100,
120} is the upper bound. However, I am still very doubtful.
Any suggestion of how to give a reasonable estimate of the income
variance in the above case? (Assuming uniform distribution between
110 and 120 is acceptable, if this assumption would help.) Thanks in
advance.
.
.
=================================================================
Instructions for joining and leaving this list, remarks about the
problem of INAPPROPRIATE MESSAGES, and archives are available at:
. http://jse.stat.ncsu.edu/ .
=================================================================
