showing that two events are dependent/independent

• Nov 16th 2012, 08:18 AM
kingsolomonsgrave
showing that two events are dependent/independent
If we have a table for two types of company which have either high or low risk sock given thus:

COMPANY TYPE LOW RISK HIGH RISK

Internet services .....6 ...............9
Financial Service .....20 ..............5

and we want to see if the company type is dependent or independent of the level of risk how do we do this?

I know if P(A intersect B) = P(A) times P(B) then we know the events are independent, and if those two expressions are not equal then we know they are dependent

how do I set up events A and B in this case?
• Nov 16th 2012, 09:25 AM
hedi
Re: showing that two events are dependent/independent
You should use the chi square test for independence.see attached.
• Nov 16th 2012, 09:36 AM
hedi
Re: showing that two events are dependent/independent
You should use the chi square test for independence.see attached.
• Nov 16th 2012, 10:14 AM
Plato
Re: showing that two events are dependent/independent
Quote:

Originally Posted by kingsolomonsgrave
If we have a table for two types of company which have either high or low risk sock given thus:
COMPANY TYPE LOW RISK HIGH RISK
Internet services .....6 ...............9
Financial Service .....20 ..............5
and we want to see if the company type is dependent or independent of the level of risk how do we do this?

I think that you are meant to simply look at the table.
There are forty stocks. Pick one at random.
Let $I$ be the event the stock comes from Internet services.
Let $L$ be the event the stock comes is low risk.

Now find $\mathcal{P}(I),~\mathcal{P}(L),~\&~,\mathcal{P}(I \cap L)$.
• Nov 16th 2012, 10:32 AM
hedi
Re: showing that two events are dependent/independent
No,you need to use the chi square test for independence as explained in the attached text or elsewhere.