One of the properties of variance is that, var(1+\(i_{t}\)) = var(\(i_{t}\)) I've done the StatsPack a year ago and therefore my stats is a bit rusty. Can anyone help me with this?
The variance of the sum of independent random variables is just the sum of the variances i.e. Var(X + Y + Z) = Var(X) + Var(Y) + Var(Z) as long as X, Y and Z are independent. 1 and i_t are independent, since it doesn't matter what i_t is, 1 will always be 1! So Var(1 + i_t) = Var(1) + Var(i_t) The variance of a number is 0, since the value is always the same, so this just equals Var(i_t)
That was a quick response, and a very good one too! Thank you so much. You've explained it very clearly! Cheers.
