INTERMEDIATE STATISTICS FOR

ECONOMICS
SEMESTER II
 UNIT 1
Sampling distribution of a Statistic
 Concept of Statistic and parameter,

 Sampling distributions,

 Central Limit Theorem.

Ref:
Devore: Ch 5.3, 5.4, 5.5

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 Statistics and their distributions
 The observations in a single sample are denoted by x1, x2, . . . , xn.
 Different samples of size n from same population will have different
values of x1, x2, . . . , xn.
 Before we obtain data, there is uncertainty about the value of each xi.
Because of this uncertainty, before the data becomes available we view
each observation as a random variable and denote the sample by X1, X2, . .
. , Xn (uppercase letters for random variables).

 Hence, sample mean, sample variance, sample standard deviation, etc., are
also rvs before sample is obtained. [These are a function of X1, X2, . . . , Xn
(which are random variables)].

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 Statistics and their distributions
 In summary, the values of the individual sample observations vary
from sample to sample, so will in general the value of any quantity
computed from sample data, and the value of a sample
characteristic used as an estimate of the corresponding population
characteristic will virtually never coincide with what is being
estimated.

 Example: Sample mean is a statistic denoted by (estimator)

 Its calculated value = (estimate)

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 Statistics and their distributions

 Any statistic, being a random variable, has a probability

distribution.
 The sample mean has a probability distribution.
 The probability distribution of a statistic is sometimes
referred to as its sampling distribution to emphasize that
it describes how the statistic varies in value across all
samples that might be selected.
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 Random Samples

•Conditions 1 and 2 implies that the Xi’s are independent and

identically distributed (iid) rvs.
•If sampling is either with replacement or from an infinite population,
Conditions 1 and 2 are satisfied exactly.
•These conditions will be approximately satisfied if sampling is
without replacement, yet the sample size n is much smaller than the
population size N. (in practice, n/N ≤ .05)

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 Deriving a Sampling Distribution
Example 1: Consider following pmf of X:

*population parameters
(5.2)

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 Deriving a Sampling Distribution
Consider following pmf of X:
*population parameters

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 Deriving a Sampling Distribution

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 Deriving a Sampling Distribution
⚫ Mean of

⚫ Variance of

<σ2

Using pmf of S2,

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 Deriving a Sampling Distribution
Example 2:

X1 and X2 are
iid. P(T0 ≤ t)

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 Deriving a Sampling Distribution
w.r.t t

⚫ Mean service time = (X1+X2)/2 = T0/2 = → T0 =2

⚫ Cdf of = P( ≤ ) = P(T0 ≤ 2 ) = FTo(2 ) = 1 – e-λ2 - 2λ e-λ2
=F ( )
⚫ Pdf of is obtained by differentiation cdf of w.r.t and hence we
obtain:

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 Deriving a Sampling Distribution

E( ) = E((X1+X2)/2 ) = (E(X1)+E(X2))/2 = (µ + µ)/2 = µ =1/λ

Var( ) = Var((X1+X2)/2 ) = (V(X1)+V(X2))/4 = (σ2 + σ2)/4 =
σ2/2 =1/2λ2
E(T0) = E(X1+X2) = E(X1)+E(X2) = µ + µ= 2µ =2/λ
Var(T0) = Var(X1+X2) = V(X1)+V(X2) = σ2 + σ2 = 2σ2 =2/λ2
Note: Bec X1 and X2 are i.i.d rvs, Cov(X1,X2) = 0.

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 Simulation Experiments

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 Simulation Experiments
Example 3:

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 Simulation Experiments
 Perform four different experiments, with 500
replications for each one.
 In the first experiment, 500 samples of n = 5
observations each were generated using Minitab, and
the sample sizes for the other three were n =10, n =
20, and n = 30, respectively.
 The sample mean was calculated for each sample,
and the resulting histograms of values appear in
the following Figure:

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 Simulation Experiments

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 Simulation Experiments
 The first thing to notice about the histograms is their shape. To a
reasonable approximation, each of the four looks like a normal curve.
 Second, each histogram is centered approximately at 8.25, the mean of the
population being sampled.

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 Simulation Experiments
Example 4:
 Consider a simulation experiment in which the population distribution is
quite skewed. Figure 5.12 shows the density curve:

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 Simulation Experiments
 Again the statistic of interest is the sample mean . The experiment utilized 500
replications and considered the same four sample sizes as in Example 3. The
resulting histograms:

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 Simulation Experiments
 Unlike the normal case, these histograms all differ in shape.
 In particular, they become progressively less skewed as the sample size n
increases.
 The average of the 500 values for the four different sample sizes are all
quite close to the mean value of the population distribution.
 If each histogram had been based on an infinite rather than just 500, all
four would have been centered at exactly 21.7584.
 Thus different values of n change the shape but not the center of the
sampling distribution of
 Comparison of the four histograms in Figure also shows that as n increases,
the spread of the histograms decreases.
 Increasing n results in a greater degree of concentration about the
population mean value and makes the histogram look more like a normal
curve.

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 The distribution of sample mean

Proof:

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 The distribution of sample mean

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 The distribution of sample mean
 This shows as n increases, variance of sample mean falls and hence
distribution of sample mean becomes more concentrated about µ.
 H.W: In similar way, prove the proposition for T0.

Example 5: Suppose X has a certain probability distribution. Let µ =

28,000 and σ = 5000. let X1,X2,...,X25 be a random sample of size
25. Then,

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 Example 6:

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 The Case of a Normal Population Distribution

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 The Case of a Normal Population Distribution
Example 7:

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 The Central Limit Theorem

 In the case of a uniform population distribution, the CLT gives a good

approximation for n ≥ 12.
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 The Central Limit Theorem
Example 8:

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 The Central Limit Theorem
 Example 9: A certain consumer organization reports the number of
major defects for each new automobile that it tests. Suppose the number of
such defects for a certain model is a random variable with mean value 3.2
and standard deviation 2.4. Among 100 randomly selected cars of this
model, how likely is it that the sample average number of major defects
exceeds 4?

 n>30, CLT is applicable whether the variable of interest is discrete or

continuous.

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 The Central Limit Theorem
 The CLT can be used to justify the normal approximation to
the binomial distribution.
 Recall that a binomial variable X is the number of successes in
a binomial experiment consisting of n independent trials with
p = P(S) for any particular trial. Define a new rv X1 by:

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 The Central Limit Theorem

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 The Distribution of a Linear Combination

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 The Distribution of a Linear Combination

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 The Distribution of a Linear Combination
Example 10:

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 The Difference Between Two Random Variables

Example 11:

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 The Case of Normal Random Variables

Example 10 revisited:

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 The Distribution of a Linear Combination

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 UNIT 1

INTERNAL ASSESSMENT TEST ON UNIT 1

DATE:_15/02/24____
Practice back questions given in Exercises of the
chapter

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