In mathematics, probability, and statistics, a multivariate random variable or random vector is a list of mathematical variables each of whose value is unknown, either because the value has not yet occurred or because there is imperfect knowledge of its value. The individual variables in a random vector are grouped together because they are all part of a single mathematical system — often they represent different properties of an individual statistical unit. For example, while a given person has a specific age, height and weight, the representation of these features of an unspecified person from within a group would be a random vector. Normally each element of a random vector is a real number.
Every random vector gives rise to a probability measure on with the Borel algebra as the underlying sigma-algebra. This measure is also known as the joint probability distribution, the joint distribution, or the multivariate distribution of the random vector.
Similarly, a new random vector can be defined by applying an affine transformation to a random vector :
, where is an matrix and is an column vector.
If is invertible and the probability density of is , then the probability density of is
Expected value, covariance, and cross-covariance
The expected value or mean of a random vector is a fixed vector whose elements are the expected values of the respective random variables.
The covariance matrix (also called the variance-covariance matrix) of an random vector is an matrix whose (i,j)th element is the covariance between the ith and the jth random variables. The covariance matrix is the expected value, element by element, of the matrix computed as, where the superscript T refers to the transpose of the indicated vector:
By extension, the cross-covariance matrix between two random vectors and ( having elements and having elements) is the matrix
where again the indicated matrix expectation is taken element-by-element in the matrix. Here the (i,j)th element is the covariance between the ith element of and the jth element of The cross-covariance matrix is simply the transpose of the matrix .
One can take the expectation of a quadratic form in the random vector X as follows::p.170–171
where C is the covariance matrix of X and tr refers to the trace of a matrix — that is, to the sum of the elements on its main diagonal (from upper left to lower right). Since the quadratic form is a scalar, so is its expectation.
Proof: Let be an random vector with and and let be an non-stochastic matrix.
In portfolio theory in finance, an objective often is to choose a portfolio of risky assets such that the distribution of the random portfolio return has desirable properties. For example, one might want to choose the portfolio return having the lowest variance for a given expected value. Here the random vector is the vector of random returns on the individual assets, and the portfolio return p (a random scalar) is the inner product of the vector of random returns with a vector w of portfolio weights — the fractions of the portfolio placed in the respective assets. Since p = wT, the expected value of the portfolio return is wTE() and the variance of the portfolio return can be shown to be wTCw, where C is the covariance matrix of .
In linear regression theory, we have data on n observations on a dependent variable y and n observations on each of k independent variables xj. The observations on the dependent variable are stacked into a column vector y; the observations on each independent variable are also stacked into column vectors, and these latter column vectors are combined into a matrix X (not denoting a random vecctor in this context) of observations on the independent variables. Then the following regression equation is postulated as a description of the process that generated the data:
where β is a postulated fixed but unknown vector of k response coefficients, and e is an unknown random vector reflecting random influences on the dependent variable. By some chosen technique such as ordinary least squares, a vector is chosen as an estimate of β, and the estimate of the vector e, denoted , is computed as
Then the statistician must analyze the properties of and , which are viewed as random vectors since a randomly different selection of n cases to observe would have resulted in different values for them.