Hi I have this question.

Suppose that the random variables are identically distributed, with mean and variance , but not independent. Assume the correlation between any pair is equal to . i.e. for .

1) Derive for this situation.

2) What is when \rho=0? Explain.

3) What is when \rho=1? Explain.

4) Use the rsult you have derived to comment on how small can be in this situation. Explain.

To me, this looks hard. I can do it for the case if the random variables are independent and identically distributed (because it is such a well-known result).

But how do you do it if the random variables are not independent? I'm a bit confused. Can someone lend me a hand and direct me to a suitable source for this question?

Thanks!!

Regards,

Lpd