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Lecture 5: Limit Theorem: Hengki Purwoto (Econ UGM) Statistics 2: Lecture 5 March 15, 2021 1
Lecture 5: Limit Theorem: Hengki Purwoto (Econ UGM) Statistics 2: Lecture 5 March 15, 2021 1
1. Introduction
2. Chebyshev’s Theorem
The theorem gives a lower bound for the area under a curve
between two points that:
◮ are on opposite sides of the mean
◮ equidistant from the mean
Why is this result important?
◮ We do not need to know the distribution of the underlying population
◮ We only need to know its mean and variance.
The theorem was developed by a Russian mathematician,
Pafnuty Chebyshev (1821-1894)
Example
Example
• If you flip a coin once, you will either get 100% heads or 0%
heads.
• If you flip a coin 1000 times, you will probably get close to
50% heads.
The Law of Large Numbers states that for many trials, the
proportion of times an event occurs settles down to one number.
See: https://youtu.be/MntX3zWNWec
Identical Probabilities
• The probabilities for each event must remain the same for each
trial.
Independence
• The outcome of a trial is not influenced by the outcomes of
the previous trials.
Empirical probability
# times A occurs
• P(A) = (in the long run)
# of trials
– P(green) = 0.35.
– If we recorded more
days, the probability
would still be about 0.35.
• Wrong
– If you flip a coin 6 times and get 6 heads, then you are due for
a tail on the next flip.
– You put 10 quarters in the slot machine and lose each time.
You are just a bad luck person, so you have a smaller chance
of winning on the 11th try.
See: https://youtu.be/D_pGQBdX55Y
x
Hengki Purwoto (Econ UGM) Statistics 2 : Lecture 5 March 15, 2021 22
3. Central limit theorem
If the Population is not Normal
Population
Sampling distribution
Distribution
properties:
Central Tendency
μx = μ
μ x
Variation Sampling Distribution
σ
σx = (becomes normal as n
increases) Larger
n sample
size
Smaller sample
size
μx x
Hengki Purwoto (Econ UGM) Statistics 2 : Lecture 5 March 15, 2021 23
3. Central limit theorem
Example of Application
Solution:
• Even if the population is not normally distributed, the central
limit theorem can be used (n > 25)
• … so the sampling distribution of x is approximately normal
• … with mean μx = 8
• …and standard deviation
σ 3
σx = = = 0.5
n 36
Example
Solution (continued):
7.8 - 8 μ X -μ 8.2 - 8
P(7.8 μ X 8.2) = P
3 σ 3
36 n 36
= P(-0.4 Z 0.4) = 0.3108