Sampling Distribution

In order to understand the sampling distribution, first consider this example. Suppose there
are 20 customers of product A and you need to take a random sample of 5.

There would be 15, 504 different samples of size 5. (20*19*18*17*16/5*4*3*2) The relative
frequency of the values of mean of these 15,504 different samples would specify the
sampling distribution of mean.

So sampling distribution is the distribution of the values of a sample statistic (mean and
standard deviation) computed for each possible sample that could be drawn from the target
population under a specified sampling plan.

We can understand it with the help of another example. For example, suppose that a sample
of size sixteen (N=16) is taken from some population. The mean of the sixteen numbers is
computed. Next a new sample of sixteen is taken, and the mean is again computed. If this
process were repeated an infinite number of times, the distribution of the now infinite number
of sample means would be called the sampling distribution of the mean.

Every statistic has a sampling distribution. For example, suppose that instead of the mean,
medians were computed for each sample. The infinite number of medians would be called the
sampling distribution of the median.

Sample Statistic:-

Sample Statistic is the summary description of a characteristic or measure of the sample. This
sample statistic is used as an estimate of the population parameter.

Population Parameter:-

Parameter refers to the summary characteristic or measure of the target population. Parameter
denotes the true value that would be obtained if a census rather than sample were undertaken.

Varaible Population Sample

Mean
μ
Proportion P
π
variance S2
σ2
Standard deviation s
σ
Size n
N
Standard Error of mean σS

Standard Error of Proportions σp

σp
Standard Variate (Z)
Z= X-µ/σ

Coefficient of variation
σ/ μ s/
An important task of marketing research is to calculate statistics such as sample mean and
sample proportion and then using them to estimate the corresponding population values. This
process is known as statistical inference.

**In practice all possible samples are not drawn. One sample of predetermined size is drawn
from the population and this sample is used to estimate the population parameters by using
probability theory.

Sampling Distribution of Mean:-

The sampling distribution of the mean is a distribution of sample means. This distribution
may be described with the parameters and . These two parameters are closely related to
the population parameters according to the Central Limit Theorem.

The Central Limit Theorem is very powerful as in most situations it is very difficult to have a
very large sample size, this theorem works reasonably well with an N greater than 30. Most
of hypothesis testing and sampling theory is based on this theorem. In addition, it provides a
justification for using the normal curve as a model for many naturally occurring phenomena.

The central limit theorem states that:

Given a population with a finite mean μ and a finite non-zero variance σ2, the sampling
distribution of the mean approaches a normal distribution with a mean of μ and a variance of
σ2/n as n, the sample size, increases.

What is remarkable is that regardless of the shape of the parent population, the sampling
distribution of the mean approaches a normal distribution as N increases.

You can see that the distribution for N = 2 is far from a normal distribution. Nonetheless, it
does show that the scores are denser in the middle than in the tails. For N = 10 the
distribution is quite close to a normal distribution. Notice that the means of the two
distributions are the same, but that the spread of the distribution for N = 10 is smaller.
Figure 2 shows how closely the sampling distribution of the mean approximates a normal
distribution even when the parent population is very non-normal. If you look closely you can
see that the sampling distributions do have a slight positive skew. The larger the sample size,
the closer the sampling distribution of the mean would be to a normal distribution.

1. Central Limit Theorem states that sampling distribution of mean is a normal distribution.
The mean of sampling distribution of the mean (calculated as: : ∑Xi/ n or proportion p =
X/n where X = count of the characteristic of interest) equal the corresponding population
parameter value μ and π.

2. The standard error is an estimate of the standard deviation of a statistic. Standard error of
the mean ( ) equals the standard deviation of the population (σ) divided by the square root
of n.

= σ/√n
Standard error of proportion is calculated as:-

σp =
3. Often the standard deviation of the sample is unknown. In these cases standard deviation is
estimated from the sample using the formula:-
In cases where σ, standard error of mean becomes:-

4. Area under the sampling distribution between any two points can be calculated in terms of Z
value. The Z value is the number of standard errors a point is away from the mean or proportion. It is
computed as:-

Or

5. When sample size is 10 % or more of the population, size, the standard error formulas will
overestimate the standard deviation of the population mean or proportion. Hence these should be
adjusted by a finite population correction factor defined by:-

PCP = √N-n/N-1

In that case, standard error would be

And standard error of proportion would be