A closed-form expression for the variance of truncated distribution and its uses

Abstract

This work sheds some light on the relationship between a distribution's standard deviation and its range, a topic that has been discussed extensively in the literature. While many previous studies have proposed inequalities or relationships that depend on the shape of the population distribution, the approach here is built on a family of bounded probability distributions based on skewing functions. We offer closed-form expressions for its moments and the asymptotic behavior as the support's semi-range tends to zero and $\infty$. We also establish an inequality in which the well-known Popoviciu's one is a special case. Finally, we provide an example using US dollar prices in four different currencies traded on foreign exchange markets to illustrate the results developed here.