In statistical terms, what distinguishes a 'stochastic' variable from a 'non-stochastic' variable?
Understand the Problem
The question is asking you to differentiate between stochastic and non-stochastic variables in statistics. It presents four possible distinctions, and you need to identify the correct one based on the fundamental definitions of these terms.
Answer
A stochastic variable is random and unpredictable, while a non-stochastic variable is deterministic.
A stochastic variable's value is determined by a random phenomenon, making it unpredictable. A non-stochastic variable has a fixed or deterministic value.
Answer for screen readers
A stochastic variable's value is determined by a random phenomenon, making it unpredictable. A non-stochastic variable has a fixed or deterministic value.
More Information
Stochastic variables are often used to model real-world phenomena that have some inherent randomness, such as stock prices, weather patterns, or the outcome of a coin flip. Non-stochastic variables are often used to represent fixed quantities or parameters in a model.
Tips
It is important to remember that the terms 'stochastic' and 'random' are not always interchangeable. While all stochastic variables are random, not all random variables are stochastic.
Sources
- What is the difference between stochastic and non-stochastic relationship - quora.com
- Random Variable - Defintion, Types, How to Calculate - corporatefinanceinstitute.com
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