E370

5/13/17
Continuing Continuous
Distributions
The Students t
Week 07, Part 6
We have been assuming perfect
information up until now, and we
now need to get realistic.
How often are we going to know
parameters?
Hardly ever.
If we dont know parameters, the
normal and standard normal may
give us wrong answers.
Our last specific
distribution
The Students t Family
They are approximations of the
Standard Normal, the Z.
They are centered at 0, just like Z.
Their units are number of standard
deviations from the mean, just like
Z.
They are symmetric and pretty bell-
shaped (some say mound-
shaped).
Their shapes are different in an
important way and change as the
Another approximation,
parameter of the t changes. . . .
 This curve is the Standard
Normal.

This curve is a Student's t

This curve is a Student's t with a larger df, 20.
with a small df, 5.

-10 -8 -6 -4 -2 0 2 4 6 8 10

See the fat tails?

 The
transformation formula to get a t-
score is
It uses a sample mean and a sample
standard deviation, so it retains the
uncertainty that comes along with not
knowing parameters.
To adjust for the uncertainty,
probability is redistributed from the
center of the distribution to the tails,
to make certain we dont
overestimate things.

What is going on with the t?

.. .approach the standard normal
as n increases?
As more values are added to the
sample, the sample gets more and
more like the population.

As it gets more like the population,

the amount of uncertainty declines.

When n=, the sample is the

population and the t becomes the Z.

Why does the Students t . . .

 When do we use the Students t?
The rule is use the Students t when population
standard deviation is NOT KNOWN. This is the
only criterion.
There are an infinite number of Students t
distributions, one for every different degrees
of freedom.
As the sample size n (ie, degrees of freedom,
n-1) increases, the t gets closer and closer to
the Z.
This means probability gets pushed out of the
tails into the center as n increases.
When n = , the t becomes the Z.

Other important t information

 Select 5 integers at random so that
the mean of all five values is 25.
If the mean = 25 and there are 5
numbers, the sum of those numbers
must be 5*25=125.
17
21+17=38
49+21+17=87
75+49+21+17=162
for the sum of 5 values to be 125 the
last value has to be 37.

What are degrees of freedom?

Out of the data set, how many
values could have been any
integer?
This number is the degrees of
freedom for the problem.
So, what are degrees of freedom?
The number of values in a sample that
are free to vary, to be any value
whatsoever.
Degrees of freedom is the sole
parameter of the Students t
What are degrees of freedom?
distribution.
 Thetreatment is almost identical to the
Standard Normal.
Thereare two commands as we saw with the
standard normal.
T.DIST(t,df,1) T.INV(, df)
Same endings to commands
.DIST gives a probability
.INV gives a value of the variable
t uses t-scores and gets t-scores back, just
like the standard normal uses z-scores and
gets z-scores back.
The only difference is that you must specify
the Students t parameter, because they
change, unlike the standard normal.

Excel and Students ts

 To
get probabilities (area
under the curve) from - to
t
=T.DIST(t, df, 1)
A sample of 25 drinks at the
Bellagio had a mean of 1.5
ounces and standard
deviation of 0.1 ounces.
What is probability that a
drink at the Bellagio will have
no more than 1.63 oz of
distilled spirits in it?
The first step is to
calculate the t-score:

=T.DIST(1.3, 24, 1) =
0.8970

Students t and Excel

To

get a t value that has a

given probability to its
left: =T.INV(, df)
Forexample, 35% of drinks
at the Bellagio will have no
more than how many ounces
of distilled spirits in them?
(n=25)
=T.INV(0.35, 24) =
0.3900
-0.39 is a t-score and
must be retranslated into
ounces, by working
backwards with the
transformation formula.

And, going in the other direction

 approximations of the standard
normal.
centered at 0
units are number of standard
deviations a value is from its mean.
a one parameter distributions, t(df)
Excel works just like the standard
normal commands, using t-scores
rather than z-scores. There is no
option for using the actual value of
the variable in terms of the problem.

The Students ts are