Lecture 4: Statistical Inference by Dr.

Javed Iqbal
Statistical Inference:
Use of sample data to infer population characteristics

Point Estimation: p-273-274 Anderson

To estimate the value of a population parameter, we compute a corresponding characteristic of the
sample, referred to as a sample statistic. For example, to estimate the population mean μ we use
the corresponding sample statistic the sample mean 𝑥̅ . If the parameter is estimated by specifying
a single value of the statistic, the process is called point estimation e.g. 𝑥̅ = 5.5 as a point estimate
of a population mean.

Interval Estimation: However, the point estimation without a measure of likely margin of error
may be misleading so alternatively we also specify a range or interval in which the parameter is
expected to lie. This process is called interval estimation e.g. an interval estimate may be
𝑥̅ ± 1.2 → 5.5 ± 1.2 → [4.3, 6.7]

An interval estimator is specified with a degree of confidence; hence it is also known as

‘Confidence Interval’.

Estimator, Estimate and Estimation:

∑𝑥
Suppose that the target parameter is population mean 𝜇 . We use the sample mean 𝑥̅ = 𝑛 as an
estimator of population parameter. Thus an estimator is a formula which uses sample data x1, x2,
… xn to arrive at an estimate of population parameter. An individual value of the estimator from a
given sample is called an estimate. This whole process is called estimation.

This can be illustrated with the example of a shooter hitting at a target. The bull’s eye is the
parameter (target), the shooter (with a gun) is the estimator and individual hits are his estimates.
i

Properties of point estimators: There may be multiple estimators of a single

parameter. For example in case of a symmetric population to estimate 𝜇 both sample
mean and sample median can be used. However, just as all shooters are not equally
expert in hitting a target so different estimators may not be equally good in
estimating a parameter.

Biased and Unbiased Estimators:

Consider a parameter 𝜃 and an estimator 𝜃̂. If the mean of sampling distribution of
𝜃̂ (also called expected of 𝜃̂ ) calculated over all possible samples is equal to the
true parameter 𝜃, then 𝜃̂ is said to be an unbiased estimator for 𝜃, i.e. 𝑖𝑓
𝐸(𝜃̂) = 𝜃
then 𝜃̂ is an unbiased estimator of 𝜃.
𝐼𝑓 𝐸(𝜃̂) ≠ 𝜃, then 𝜃̂ is a biased estimator.
The sample mean is an unbiased estimator of population mean.

Efficient and Inefficient Estimators:

Two estimators 𝜃̂1 and 𝜃̂2 of the same parameter 𝜃 may both be unbiased but one
(say 𝜃̂1 ) may be more precise (i.e. having lower variance) than the other 𝜃̂2 . In this
case 𝜃̂1 is said to be more efficient than 𝜃̂2 . The left column in the following figure
indicates two estimators. The top one is unbiased and the bottom one is biased. The
first row indicates two (unbiased) estimators. The left one is more efficient than the
right one.
Weiss Example 8.1 p-354. Anderson Ex 11, 12 p-275

Ex 11: a) 𝑥̅ = 9 thousands of dollar is the estimate of 𝜇, 𝑏) 𝑠 = 3.098 thousands of dollar

as an estimate of 𝜎.

Ex 12: a) 𝑝̂ = 0.5 is the estimate of proportion of population p with Yes. b) 𝑝̂ =

0.367 is the estimate of proportion of population p with No.

Confidence Interval for Population mean 𝝁 when 𝝈𝟐 is known.

Weiss Example 8.2 p-355, Confidence Interval: Definition 8.2 p- 356

Interpretation of Confidence interval Example 8.3 p-357.
Confidence Interval for Population mean 𝝁 when 𝝈𝟐 is known:
An interval estimator is an associated confidence level. Most often used confidence
levels are 90%, 95% and 99%. A confidence level is written in the form of 1 − 𝛼
where 𝛼 is a number between 0 and 1.
Confidence Level 1−𝛼 𝛼 𝛼⁄ 𝑧𝛼⁄2
2
90% 0.90 0.10 0.05 1.645
95% 0.95 0.05 0.025 1.960
99% 0.99 0.01 0.005 2.575
2
Weiss p-361: Confidence Interval for Population mean 𝜇 when 𝜎 is known:

A 100(1 − 𝛼)% Confidence Interval for 𝜇 when 𝜎 2 is known:

𝜎 𝜎
𝑥̅ − 𝑧𝛼⁄2 to 𝑥̅ + 𝑧𝛼⁄2
√𝑛 √𝑛

Where 𝑧𝛼⁄2 is the value of standard normal random variable to the right of which
area (probability) is 𝛼⁄2.
𝜎
Thus margin of error = 𝑧𝛼⁄2
√𝑛
For 95% CI, 𝛼 = 0.05
Meaning of 95 % CI for population mean 𝜇
Suppose for a given normal population 𝜇 = 10 and 𝜎 = 2.
We draw 1000 repeated samples each of size n = 20 from this distribution and for each sample
we calculate a 95% CI for 𝜇
Approximately 95% of these CI will contain 𝜇
Excel Demo on CI for mu with known sigma