E370

5/13/17
Inferential Methods:
Confidence Interval
Estimation
Week 10 Part 1
Discrete w/ Probability Single variable with probability distribution; E(X), V(X)
Distribution

Linear Combinations Multiple variables with known expected values E(aX + bY), V(aX +
bY)

Bernoulli Single trial resulting in one of two mutually exclusive and collectively
exhaustive outcomes.
One parameter, E(X)=, V(X) = (1-)

Binomial: X~B(n, ) Repeated, independent Bernoulli trials with constant probability of

success.
Parameters n, E(X)=n* V(X) = n**(1-)

Uniform: X~U(a, b) Simplest continuous distribution; pdf is horizontal, parallel to X axis

Parameters a, b

Normal: X~N(, ) Bell-shaped and symmetric Parameters ,

Utility Distributions Standard Normal=Z~N(0, 1)

Students t: t(df)

Sampling Distributions Sample mean if X~N or, if n > 30.

Sample proportion if X is a binomial, and n* > 5 AND n*(1-)> 5

Confidence Interval Estimation

Population Mean, known

Population Mean, unknown

Population Proportion, n*>5,

n*(1-) > 5
 To
Confidence Interval estimate
Populatio
n Mean
when is
Estimation

known
To
estimate
Populatio
n Mean
To
when is
estimate
unknown
Populatio
n
Proportio
n when
n*>5 &
n*(1-) >
5
 Parameters are important!
We never know parameters,
but, we WANT to know parameters!
About the closest we are going to get is to
make educated guesses about parameter
values.
Ourfirst inferential task is to figure
out how to estimate parameters.
Wewill focus on estimating the population
mean, , and the population proportion, .

The first real inferential method

 There are two kinds of estimators we will
think about in this class. They are point
estimators and interval estimators.
Point estimators are single values used to
estimate the parameter of interest.
There are several possible estimators for different
parameters; the population mean can be estimated
by a single observation drawn from the population,
the sample mean and the sample median.
Interval estimators produce a range of values
a parameter might reasonably be. The most
common interval estimator is the Confidence
Interval.

Estimators
 Wehave options when we choose
point estimators, so criteria have
been developed for selecting the best
point estimator.
Thebest estimators are unbiased; they
are close to the parameter they estimate.
An estimator is unbiased if its expected value is
equal to the parameter being estimated.
Thebest unbiased estimators are those
that vary the least.
An efficient estimator is one that has the
smallest variance of all estimators.

A word about point estimators

Theunbiased estimator for the
population mean with the smallest
variance is the sample mean.
and (and )
The unbiased estimator for the
population proportion with the
smallest variance is the sample
proportion.
and

So, the best are . . .?

. . .about these best estimators.

We know the circumstances under

which their distributions will be
normal.

if the population is normally

distributed or if n> 30.
p~N if n* >5 and n*(1-) >5

We know something else . . .

Point estimators are good as far as
they go, which is to give us a
single best guess for the value of
the parameter we want to know.
But we know from our work with
sampling distributions that sample
means and sample proportions change
with the sample.
So, while a sample mean is the best
single value we have, we dont know
how good it is. We need some idea of
just how close our guess is to the
parameter.
But we dont stop here . . .
Turns out that using an interval
estimator with the best point
estimators gives us just what we
need.
A Confidence Interval is a point
estimate in the middle of an
interval estimate.
The interval provides wiggle room
which captures the variation due to
the randomness of the point estimate.
We select how precise we want our
estimate to be and calculate the
A point
correct estimator with
amount of wiggle friends
room.
 An interval estimate centered at a
point estimate.
They are most often (and always in this
class) a statistic (point estimate) plus
and minus a margin of error (the
wiggle room.)
The distance between the point
estimate and the lower end of the
interval is always the same as the
distance between the point estimate
and the upper end of the interval.
We pick the level of precision we want
and calculate an interval in the units
The Confidence Interval
we need to solve our problem.
 Point Estimate the center point of the interval
estimate.
Level of Confidence how sure we are of our
estimate expressed as a probability; the area above
the interval.
Critical Values The level of confidence translated
into a number of standard deviations away from the
point estimate.
Alpha The area under the curve outside the
interval, 1- Level of Confidence.
Margin of Error The wiggle room, the distance from
the point estimate to either end of the interval.
The Interval The upper and lower limits of the
interval, or the point estimate the margin of error.

Confidence Interval Language

Level of
Confidence
Parts:
Alpha
Critical Values
Point Estimate
Margin of
Error
The Interval

Anatomy
of a Confidence Interval
 =ABS(NORM.S.INV(/

2))
= NORM.S.INV(1- /2)

=ABS(T.INV(/2, n-1))
=T.INV(1- /2, n-1)

=ABS(NORM.S.INV(/
2))
= NORM.S.INV(1- /2)

Margins of Error