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Chapter 4
Part I. Sampling Distributions
and Confidence Intervals
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Section 1.
Sampling Distribution
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Using Statistics
• Statistical Inference:
Predict and forecast values of On basis of sample statistics
population parameters... derived from limited and
Test hypotheses about values incomplete sample
of population parameters...
information
Make decisions...
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Estimators
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X X X X X X X
X X X X X X X
X X X X
Sample points
Sample mean X
( )
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Sampling Distributions
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P(X)
0.1
E( X ) X X 0.10
X2
P(X)
Var( X ) 0.05
n
0.00
1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0
X
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2
X ~ N (, )
n
This means that, as the sample size Sampling Distribution of the Sample Mean
increases, the sampling distribution 0.4
f(X)
0.2
but becomes more compactly
Sampling Distribution: n = 2
distributed around that population 0.1
Normal population
mean 0.0
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n=5
When sampling from a population with 0.25
P(X)
0.10
sampling distribution of the sample mean 0.05
0.00
will tend to a normal distribution with mean X
and standard deviation as the sample n = 20
n 0.2
size becomes large (n >30).
P(X)
0.1
Large n
0.4
0.3
f(X)
0.2
0.1
0.0
-
X
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Student’s t Distribution
0 .4
P(X)
0 .2
number of trials, n.
0 .0
0 1 2
n=10,p=0.3
X 0.3
P(X)
0.1
0.0
0 1 2 3 4 5 6 7 8 9 10
X
P(X)
p (1 p )
0.1
deviation
n 0.0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 X
0 1 2 3 4 5 6 7 8 9 10 11 12 13 1415
15 15 15 15 15 15 15 15 15 1515 15 15 15 1515 ^p
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Types of Estimators
• Point Estimate
A single-valued estimate.
A single element chosen from a sampling distribution.
Conveys little information about the actual value of the
population parameter, about the accuracy of the estimate.
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In either case :
Standard Normal Distribution 95%:Interval
0.4
P 1 . 96 X 1 . 96 0 . 95
n n 0.3
f(z)
0.2
or
0.1
0.0
P X 1 . 96 X 1 . 96 0 . 95 -4 -3 -2 -1 0 1 2 3 4
n n z
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That is, x 1.96 is a 95% confidence interval for .
n
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95%
0.3
Approximately 95% of sample means
can be expected to fall within the
f(x)
0.2
x
So 5% can be expected to fall outside
x
the interval 1.96 , 1.96 .
2.5% fall below n n
the interval x
x
x
x 2.5% fall above
the interval
x
x
x
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0.2
around the sample mean can be expected
0.1
2.5% 2.5% to include the actual value of the
0.0
x
population mean, . (When the sample
196
1.96
n
.
n mean falls within the 95% interval around
the population mean.)
x
x
x x x
x
* x
x
x
x
x
x
x
x
*
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We define z as the z value that cuts off a right-tail area of under the standard
2
normal curve. (1-) is called the confidence coefficient. is called the error
2
0.2
P z z z (1 )
0.1 2 2
2 2
0.0 (1- )100% Confidence Interval:
-5 -4 -3 -2 -1 0 1 2 3 4 5
z Z z x z
2 2
2 n
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(1 )
z
Stand ard N o rm al Distrib utio n
0.4
2 2 (1 )
0.3
0.99 0.005 2.576
f(z)
0.2
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When sampling from the same population, using a fixed sample size,
the higher the confidence level, the wider the confidence interval.
0.4 0.4
0.3 0.3
f(z)
f(z)
0.2 0.2
0.1 0.1
0.0 0.0
-5 -4 -3 -2 -1 0 1 2 3 4 5 -5 -4 -3 -2 -1 0 1 2 3 4 5
Z Z
When sampling from the same population, using a fixed confidence level, the
larger the sample size, n, the narrower the confidence interval.
0 .4 0 .9
0 .8
0 .3 0 .7
0 .6
0 .5
f(x)
f(x)
0 .2
0 .4
0 .3
0 .1
0 .2
0 .1
0 .0 0 .0
x x
Note: The width of a confidence interval can be reduced only at the price of:
a lower level of confidence, or a larger sample.
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Example 1
Population consists of the Fortune 500 Companies (Fortune Web
Site), as ranked by Revenues. You are trying to to find out the
average Revenues for the companies on the list.
The population standard deviation is $15,056.37. A random sample
of 30 companies obtains a sample mean of $10,672.87. Give a 95%
and 90% confidence interval for the average Revenues
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Chi-square Distribution
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t distribution
X
The statistic T ~ t n 1 degrees of freedom=(n-1)
S /n2
Standard Normal
t (df = 13)
Bell-Shaped
Symmetric
‘Fatter’ t (df = 5)
Tails
Z
t
0
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Student’s t Table
Let: n = 3
df = n - 1 = 2
Upper Tail Area
= .10
/2 =.05
r .25 .10 .05
t Values 0 2.920 t
Find t values:
1. α=0.10, n=20 2. α=0.01, n=8 3. α=0.025, n=10
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Example 2:
A stock market analyst wants to estimate the average return on a certain
stock. A random sample of 15 days yields an average (annualized)
return of x 10.37% and a standard deviation of s = 3.5%. Assuming a
normal population of returns, give a 95% confidence interval for the
average return on this stock.
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Section 3.
Confidence Interval for Proportions
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A large - sample (1- )100% confidence interval for the population proportion, p :
pˆ z α pq
ˆˆ
n
2
where the sample proportion, p̂, is equal to the number of successes in the sample, x,
divided by the number of trials (the sample size), n, and q̂ = 1- p̂.
For estimating p, a sample is considered large enough when np 5 and n(1- p) 5
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Example 3
A marketing research firm wants to estimate the share that foreign companies
have in the American market for certain products. A random sample of 100
consumers is obtained, and it is found that 34 people in the sample are users
of foreign-made products; the rest are users of domestic products. Give a
95% confidence interval for the share of foreign products in this market.
pq
( 0.34 )( 0.66)
p z 0.34 1.96
2
n 100
0.34 (1.96)( 0.04737 )
0.34 0.0928
0.2472 ,0.4328
Thus, the firm may be 95% confident that foreign manufacturers control
anywhere from 24.72% to 43.28% of the market.
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f( )
The chi-square distribution df = 30
2
0 .0 5
0 .0 4
2
( n 1) s 2
2
2
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2 2
2
1
2
2
where is the value of the chi-square distribution with n - 1 degrees of freedom
2 2
that cuts off an area to its right and is the value of the distribution that
1
2 2
cuts off an area of to its left (equivalently, an area of 1 to its right).
2 2
* Note: Because the chi-square distribution is skewed, the confidence interval for the
population variance is not symmetric
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2
( n 1 ) s2
( n 1 ) s (30 1)18540 (30 1)18540
2
,
2
457
.
,
16.0 11765,33604
2
1
2
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Sample-Size Determination
For example: A (1- ) Confidence Interval for : x z
2 n
Bound, B
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The sample size determines the bound of a statistic, since the standard
error of a statistic shrinks as the sample size increases:
Sample size = 2n
Standard error
of statistic
Sample size = n
Standard error
of statistic
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z
2 2
n 2
B 2
2 2
(1.96 ) ( 400 )
2
120
42 .684 43
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z2 pq
n 2
B2
2.5762 (0.25)(0.75)
. 2
010
124.42 125
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