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1. the low estimator, Θ l = Θl (X1 , X2 , ⋯ , Xn ) , and
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2. the high estimator, Θh = Θh (X1 , X2 , ⋯ , Xn ) .
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The interval estimator is given by the interval [Θ l , Θh ] . The estimators Θl and Θh are chosen such that the
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probability that the interval [Θ l , Θh ] includes θ is larger than 1 − α . Here, 1 − α is said to be confidence
level. We would like α to be small. Common values for α are 0.1 , .05 , and .01 which correspond to
confidence levels 90%, 95%, and 99% respectively. Thus, when we are asked to find a 95% confidence
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interval for a parameter θ, we need to find Θ l
and Θ h
such that
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P (Θl < θ and Θh > θ) ≥ 0.95
The above discussion will become clearer as we go through examples. Before doing that let's formally define
interval estimation.
Interval Estimation
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P (Θl ≤ θ and Θh ≥ θ) ≥ 1 − α,
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for every possible value of θ. Equivalently, we say that [Θ l , Θh ] is a (1 − α)100% confidence interval
for θ.
Note that the condition
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P (Θl ≤ θ and Θh ≥ θ) ≥ 1 − α
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P (Θl ≤ θ ≤ Θh ) ≥ 1 − α, or P (θ ∈ [Θl , Θh ]) ≥ 1 − α.
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The randomness in these terms is due to Θ l and Θh , not θ. Here, θ is the unknown quantity which is
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assumed to be non-random (frequentist inference). On the other hand, Θ l
and Θ h
are random variables
because they are functions of the observed random variables X1 , X2 , X3 , . . ., Xn .
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27/02/2024, 23:41 The General Framework of Interval Estimation
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