Estimation

Interval Estimation
In many practical problems, the exact
knowledge of the parameter may not
be necessary. It is quite adequate if an
interval along with a probability
statement is specified such that the
probability that the random interval will
cover the unknown parameter is a
specified number.
Statistical Methods

Usha A. Kumar, IIT Bombay

Confidence intervals

Let
The population distribution be normal.
The value of the population standard
deviation be known.

Statistical Methods

Usha A. Kumar, IIT Bombay

2
1

Statistical Methods

Usha A. Kumar, IIT Bombay

Random interval
X Z

X +Z

X Z

Statistical Methods

Usha A. Kumar, IIT Bombay

Random Interval

For = 0.05 , the random interval is

+
X
1.96
,
X
1.96

n
n

The probability is 0.95 that the random

interval includes or covers the true
value of .

Statistical Methods

Usha A. Kumar, IIT Bombay

Confidence Interval for

X 1 x=
x2 , =
, X n xn , we
1, X 2
If after observing =
compute the observed sample mean x
and then substitute x in the random
interval, the resulting fixed interval is called
the 100(1 )% confidence interval for .

Statistical Methods

Usha A. Kumar, IIT Bombay

Confidence Interval for

The confidence interval can be

expressed as

+
,
x
x

is a 100(1- )% CI for
Z
Z
2
2
n
n

or

x
x

with 100(1- )% confidence.

Z
Z
2
2
n
n

Statistical Methods

Usha A. Kumar, IIT Bombay

Example
Suppose it is known that the life of
electric tubes manufactured by a
company is normally distributed with
a standard deviation of 50 hours. A
random sample of 49 pieces observed
for life estimation showed an average
life of 1180 hrs. Compute a 95
percent confidence interval for the
population mean of tubes
manufactured by this company.
Statistical Methods

Usha A. Kumar, IIT Bombay

Example
A new drug discovered to decrease
blood pressure was tested on 100
patients which shows a mean
decrease of 18 units and a sample
standard deviation of 6 units. Find
the 99% confidence interval for the
mean decrease in blood pressure due
to the new drug.
Statistical Methods

Usha A. Kumar, IIT Bombay

Large sample Confidence

Intervals
If n is sufficiently large, the standardized variable

X
Z=
/ n

has approximately a standard normal distribution.

This implies that

x z / 2
n
is a large sample confidence interval for with
confidence level approximately 100(1 )% . This
formula is valid regardless of the shape of the
population distribution.
Statistical Methods

Usha A. Kumar, IIT Bombay

Large sample Confidence

Intervals - unknown

Consider the standardized variable

X
Z=
s/ n

Both X and vary in value from one sample to

another. However, for large n the substitution
of S for adds little extra variability and
hence this variable also has approximately a
standard normal distribution.
Statistical Methods

Usha A. Kumar, IIT Bombay

Example
A department store wants to determine the
percentage of shoppers who leave only after
having actually bought at least one item. A
random sample of 900 shoppers leaving the
store showed that 750 had bought
something, ranging from a candy bar to a
complete living room furniture set. Find a
90% confidence interval for the true
percentage of buyers?
Statistical Methods

Usha A. Kumar, IIT Bombay

Confidence interval for

Population proportion

Let p be the proportion of successes

in a population.
If np 10 and nq 10,

P z / 2 <

p p
< z / 2 1

p (1 p ) / n

Statistical Methods

Usha A. Kumar, IIT Bombay

Confidence interval for

Population proportion

A confidence interval for a population

proportion p with confidence level
approximately 100(1 )% is

z2 / 2
z2 / 2
z2 / 2
z2 / 2
pq
pq
z / 2
+ 2 p +
+ z / 2
+ 2
p +
2
n
n
4
n
2
n
n
4n

1 + ( z2 / 2 ) / n
1 + ( z2 / 2 ) / n

The approximate confidence limits are

p z / 2
Statistical Methods

pq
n
Usha A. Kumar, IIT Bombay

Example
The length of time required for
persons taking the civil service test is
assumed to be normally distributed. A
random sample of 16 persons taking
the test is conducted and their test
times are recorded, yielding an
average test time of 60 minutes with
a standard deviation of 12 minutes.
Find a 95 percent confidence interval
for the population mean test time.
Statistical Methods

Usha A. Kumar, IIT Bombay

The t distribution

The population has a normal

distribution.
The value of the population standard
deviation is unknown.

Statistical Methods

Usha A. Kumar, IIT Bombay

Result

When X is the mean of a random

sample of n from a normal distribution
with mean , the rv
T=

X
S/ n

has a probability distribution called a t

distribution with n-1 degrees of
freedom.
Statistical Methods

Usha A. Kumar, IIT Bombay

The t Distribution
Developed by British statistician, William
Gosset
A family of distributions -- a unique
distribution for each value of its
parameter, degrees of freedom (d.f.)
Symmetric, Unimodal, Mean = 0, Flatter
than Z

Statistical Methods

Usha A. Kumar, IIT Bombay

The density of T

The density of T is

[(v + 1) / 2] t
=
f (t )
1 +
v
(v / 2) v
2

( v +1) / 2

, < t <

where v is the degrees of freedom.

Statistical Methods

Usha A. Kumar, IIT Bombay

Standard Normal
t (d.f. = 25)
t (d.f. = 5)
t (d.f. = 1)

-3

-2

Statistical Methods

-1

Usha A. Kumar, IIT Bombay

Confidence Interval for

Let x and s be the sample mean and

sample standard deviation computed
from the results of a random sample
from a normal population with mean .
Then a 100(1 )% confidence interval for
is
s
s

, x + t / 2,n 1
x t / 2,n 1

n
n

Statistical Methods

Usha A. Kumar, IIT Bombay

Example
A random sample of 20 teletype operators
indicates that their salaries fluctuate quite a
bit. The sample standard deviation of their
daily salaries is Rs. 90. Construct a 90
percent confidence interval on the
population standard deviation of the daily
salaries.

Statistical Methods

Usha A. Kumar, IIT Bombay

Result

Let X 1 , X 2 ,, X n be a random
sample from a normal distribution
2

and

with parameters
. Then the
rv
(n 1) S

( X i X )

has a chi squared probability

distribution with n-1 df.
Statistical Methods

Usha A. Kumar, IIT Bombay

Selected 2 Distributions
df = 3
df = 5
df = 10

0
Statistical Methods

Usha A. Kumar, IIT Bombay

Chi square density function

The continuous random variable X has
a chi-squared distribution, with v
degrees of freedom, if its density
function is given by
f ( x)

1
v / 2 1 x / 2
x
e , x>0
v/2
2 (v / 2)

where v is a positive integer.

Statistical Methods

Usha A. Kumar, IIT Bombay

Confidence Interval for 2 .

2

( n 1) S 2
2
< / 2, n 1 =
1
P 1 / 2, n 1 <
2

or
( n 1) S 2

/ 2, n 1
2

< <
2

( n 1) S 2

12 / 2, n 1

Thus
( n 1) s 2 ( n 1) s 2
, 2
2
is a 100(1- )% confidence
/ 2, n 1 1 / 2, n 1
interval for 2 .
Statistical Methods

Usha A. Kumar, IIT Bombay