Statistical Inference

The statistical inference is the process of arriving at conclusions

concerning the parameters of the population on the basis of
information contained in thee sample selected from the population.

Statistical
inference

Hypothesis
Estimation
Testing
 Estimation
Estimation is a division of statistics and signal processing that determines the values of
parameters through measured and observed empirical data.  The process of estimation is
carried out in order to measure and diagnose the true value of a function or a particular set
of populations.  It is done on the basis of observations on the samples, which are a
combined piece of the target population or function.

Point
Estimation
Estimation
Interval
Estimation
 Point Estimation
Point estimators are defined as functions that can be used to find the approximate value of a
particular point from a given population parameter. The sample data of a population is used to
find a point estimate or a statistic that can act as the best estimate of an unknown parameter
that is given for a population. 

What are the Methods Used to Calculate Point Estimators?

The maximum likelihood method is a popularly used way to calculate point estimators. This
method uses differential calculus to understand the probability function from a given number of
sample parameters. 
Named after Thomas Bayes, the Bayesian method is another way using which the frequency
function of a parameter can be understood. This is a more non-traditional approach. However, in
this case, enough information on the distribution of the parameter is not always given but in
case it is, then the estimation can be done fairly easily. 
 Qualities of a Good Estimator
• Consistent - We can say that the larger is the sample size, the more accurate is the estimate. 
• Unbiased - The expectation of the observed values of various samples equals the
corresponding population parameter. Let’s take, for example, We can say that sample mean is
an unbiased estimator for the population mean.
• Most Efficient That is also Known as Best Unbiased - of all the various consistent, unbiased
estimates, the one possessing the smallest variance (a measure of the amount of dispersion
away from the estimate). In simple words, we can say that the estimator varies least from
sample to sample and this generally depends on the particular distribution of the population.
For example, the mean is more efficient than the median (that is the middle value) for the
normal distribution but not for more “skewed” ( also known as asymmetrical) distributions.
 Interval Estimation
In this method, in a given sample, the interval of the possible values of
an unknown parameter is calculated. The interval is calculated in a way
that it falls between 95 percent probability or higher than that as well.
This is also called the confidence interval and it can imply how reliable
and efficient the interval calculated is. There are two endpoints which
are called the upper and lower limits.

P[-Z/2 , ≤≤ Z∞/2 ] = 1-
 Hypothesis Testing
Hypothesis testing in statistics refers to analyzing an assumption about
a population parameter. It is used to make an educated guess about an
assumption using statistics. With the use of sample data, hypothesis
testing makes an assumption about how true the assumption is for the
entire population from where the sample is being taken. 

To approach any hypothesis, we follow these four simple steps that test its validity.
1. First, we formulate two hypothetical statements such that only one of them is true. By doing
so, we can check the validity of our own hypothesis.
2. The next step is to formulate the statistical analysis to be followed based upon the data points.
3. Then we analyze the given data using our methodology.
4. The final step is to analyze the result and judge whether the null hypothesis will be rejected or
is true.
Procedure of Hypothesis Testing
1.State the hypotheses - This step involves stating both null and alternative
hypotheses. The hypotheses should be stated in such a way that they are
mutually exclusive. If one is true then other must be false.
2.Formulate an analysis plan - The analysis plan is to describe how to use the
sample data to evaluate the null hypothesis. The evaluation process focuses
around a single test statistic.
3.Analyze sample data - Find the value of the test statistic (using properties
like mean score, proportion, t statistic, z-score, etc.) stated in the analysis plan.
4.Interpret results - Apply the decisions stated in the analysis plan. If the value
of the test statistic is very unlikely based on the null hypothesis, then reject the
null hypothesis.
Types of Error in Hypothesis Testing
o       Type I error
o       Type II error

1. Error of Type I :Null hypothesis is rejected when it is true.

2. Error of Type II:Null hypothesis is accepted when it is not true.
I. Type I error involves cases where a hypothesis is true, but it is rejected because the test statistic
exceeds the critical value for the significance level α. This might be considered a "false negative"
result. The probability of a Type I error occurring is the same as the significance level--in other
words, the probability of a Type I error decreases with decreasing α. Recall that for a random
variable (or test statistic) X,

II.Type II error occurs when the null hypothesis is false, but the data does not indicate that it should
be rejected. This situation could be considered a "false positive" result. Such a case might involve a
loaded coin that happens to have a fair distribution of heads and tails in a certain series of flips. The
probability that a Type II error occurs is the same as the probability that the random variable (or test
statistic) does not exceed the critical value c if the alternative hypothesis is assumed to be true:
 Test of Significance

A test of significance may be a formal procedure for comparing

observed data with a claim (also called a hypothesis), the reality of which
is being assessed. It may be a statement with a few of the parameters,
like the population proportion p or the population mean µ.
Once the sample data has been collected through an observational
study or an experiment, statistical inference will allow the analysts to
assess the evidence in favor or some claim about the population from
which the sample has been taken from. 
Limitations of Test of Significance
Process of Significance Testing

In the process of testing for statistical significance, there are the

following steps:
1.Stating a Hypothesis for Research
2.Stating a Null Hypothesis
3.Selecting a Probability of Error Level
4.Selecting and Computing a Statistical Significance Test
5.Interpreting the results
Limitations of Test of significance
1. Test of significance should not be used mechanically . “what should be kept in
mind here is that testing is not decision making it self . The result of statistical
tests are only use aids for managerial evidence is important to intelligent