# Introduction to Inference Estimating with Confidence PBS Chapter 6.1 © 2009 W.H. Freeman and Company

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Overview of Inference  Methods for drawing conclusions about a population from sample data are called statistical inference  Methods  Confidence Intervals - estimating a value of a population parameter  Tests of significance - assess evidence for a claim about a population  Inference is appropriate when data are produced by either  a random sample or  a randomized experiment

### Text of Introduction to Inference Estimating with Confidence PBS Chapter 6.1 © 2009 W.H. Freeman and...

• Introduction to InferenceEstimating with ConfidencePBS Chapter 6.1 2009 W.H. Freeman and Company

• Objectives (PBS Chapter 6.1)

Estimating with confidence

Statistical confidenceConfidence intervalsBehavior of confidence intervalsChoosing the sample sizeCautions

• Overview of InferenceMethods for drawing conclusions about a population from sample data are called statistical inference

Methods

Confidence Intervals - estimating a value of a population parameterTests of significance - assess evidence for a claim about a population

Inference is appropriate when data are produced by either

a random sample ora randomized experiment

• Uncertainty and confidenceAlthough the sample mean, , is a unique number for any particular sample, if you pick a different sample you will probably get a different sample mean.

In fact, you could get many different values for the sample mean, and virtually none of them would actually equal the true population mean, .

• But the sample distribution is narrower than the population distribution, by a factor of n.

Thus, the estimates gained from our samples are always relatively close to the population parameter .nSample means,n subjectsmPopulation, xindividual subjectsIf the population is normally distributed N(,), so will the sampling distribution N(,/n),

• Red dot: mean valueof individual sample95% of all sample means will be within roughly 2 standard deviations (2*s/n) of the population parameter m.

Because distances are symmetrical, this implies that the population parameter m must be within roughly 2 standard deviations from the sample average , in 95% of all samples.This reasoning is the essence of statistical inference.

• The weight of a single egg of the brown variety is normally distributed N(65 g,5 g).Think of a carton of 12 brown eggs as an SRS of size 12..You buy a carton of 12 white eggs instead. The box weighs 770 g. The average egg weight from that SRS is thus = 64.2 g. Knowing that the standard deviation of egg weight is 5 g, what can you infer about the mean of the white egg population?

There is a 95% chance that the population mean is roughly within 2s/n of , or 64.2 g 2.88 g.population sample What is the distribution of the sample means ?

Normal (mean m, standard deviation s/n) = N(65 g,1.44 g). Find the middle 95% of the sample means distribution.

Roughly 2 standard deviations from the mean, or 65g 2.88g.

• Confidence intervalThe confidence interval is a range of values with an associated probability or confidence level C. The probability quantifies the chance that the interval contains the true population parameter. 4.2 is a 95% confidence interval for the population parameter m. This equation says that in 95% of the cases, the actual value of m will be within 4.2 units of the value of .

• ImplicationsWe dont need to take a lot of random samples to rebuild the sampling distribution and find m at its center.

• RewordedWith 95% confidence, we can say that should be within roughly 2 standard deviations (2*s/n) from our sample mean .

In 95% of all possible samples of this size n, will indeed fall in our confidence interval.In only 5% of samples would be farther from .

• A confidence interval can be expressed as:Mean m m is called the margin of errorm within mExample: 120 6

Two endpoints of an interval m within ( m) to ( + m) ex. 114 to 126

A confidence level C (in %) indicates the probability that the falls within the interval. It represents the area under the normal curve within m of the center of the curve.mm

• Review: standardizing the normal curve using zN(0,1)N(64.5, 2.5)N(, /n)Standardized height (no units)Here, we work with the sampling distribution, and s/n is its standard deviation (spread).Remember that s is the standard deviation of the original population.

• Varying confidence levelsConfidence intervals contain the population mean m in C% of samples. Different areas under the curve give different confidence levels C. Example: For an 80% confidence level C, 80% of the normal curves area is contained in the interval.Cz*z*Practical use of z: z* The critical value z* is related to the chosen confidence level C. C is the area under the standard normal curve between z* and z*.

• How do we find specific z* values?We can use a table of z/t values (Table C). For a particular confidence level, C, the appropriate z* value is just above it. We can use software. In Excel: =NORMINV(probability,mean,standard_dev) gives z for a given cumulative probability.

Since we want the middle C probability, the probability we require is (1 - C)/2

Example: For a 98% confidence level, =NORMINV(.01,0,1) = 2.32635 (= neg. z*)Example: For a 98% confidence level, z*=2.326

• Link between confidence level and margin of errorThe confidence level C determines the value of z* (in table C).The margin of error also depends on z*.Higher confidence C implies a larger margin of error m (thus less precision in our estimates).

A lower confidence level C produces a smaller margin of error m (thus better precision in our estimates).

• How confidence intervals behave

The margin of error gets smaller:

When z* gets smaller. Smaller z* is the same as lower confidence level C.

When gets smaller. It is easier to estimate when is small.

When n gets larger.

• Changing the sample size n 95% confidence interval for the mean LTDR, z* = 1.96, n = 110.

= 76.7 1.96(12.3/110)

= 76.7 2.3 = (74.4, 79.0) 95% confidence interval for the mean LTDR, z* = 1.96, n = 25.

= 76.7 1.96(12.3/25)

= 76.7 4.8 = (71.9, 81.5) Banks Loan-to-Deposit Ratio (LTDR)The mean LTDR for 110 banks is 76.7 and the standard deviation s = 12.3. The sample is large enough for us to use s as . Give a 95% confidence interval for mean LTDR. Suppose there were only 25 banks in the survey, and the sample mean and are unchanged. The margin of error increases for the smaller sample.

• Impact of sample sizeThe spread in the sampling distribution of the mean is a function of the number of individuals per sample. The larger the sample size, the smaller the standard deviation (spread) of the sample mean distribution. But the spread only decreases at a rate equal to n. Sample size nStandard error n

• Sample size and experimental designYou may need a certain margin of error (e.g., drug trial, manufacturing specs). In many cases, the population variability (s) is fixed, but we can choose the number of measurements (n). So plan ahead what sample size to use to achieve that margin of error.Remember, though, that sample size is not always stretchable at will. There are typically costs and constraints associated with large samples. The best approach is to use the smallest sample size that can give you useful results.

• What sample size for a given margin of error?

Banks Loan-to-Deposit Ratio (LTDR)

Recall that we found margin of error = 2.3 for estimating the mean LTDR of banks with n = 110 and 95% confidence. We are willing to settle for margin of error 3.0 next year. How many banks should we survey?For 95% confidence, z* = 1.96, assume = 12.3. Using only 64 observations will not be enough to ensure that m is no more than 3.0. Therefore, we need at least 65 observations.

• Some cautionsThe data must be an SRS from the population.

The formula is not correct for sampling designs more complex than an SRS (such as multistage or stratified samples).

Outliers can have a large effect on the confidence interval.

Examine your data carefully for skewness and other signs of non-Normality.

You must know the standard deviation of the population.

• Introduction to Inference Tests of SignificancePBS Chapter 6.2 2009 W.H. Freeman and Company

• Objectives (PBS Chapter 6.2)Tests of significance

Reasoning of significance testsStating hypothesesTest statistics and P-valuesTests for a population meanThe significance level aTwo-sided tests and confidence intervalsP-values versus fixed a

• We have seen that the properties of the sampling distribution of the sample mean help us estimate a range of likely values for population mean .We can also rely on the properties of the sample distribution to test hypotheses.

Example: You are in charge of quality control in your food company. You sample randomly four packs of cherry tomatoes, each labeled 1/2 lb. (227 g).

The average weight from your four boxes is 222 g. Obviously, we cannot expect boxes filled with whole tomatoes to all weigh exactly half a pound. Thus,Is the somewhat smaller weight simply due to chance variation? Is it evidence that the calibrating machine that sorts cherry tomatoes into packs needs revision?

Reasoning of significance tests

• Stating hypothesesA test of statistical significance tests a specific hypothesis using sample data to decide on the validity of the hypothesis. In statistics, a hypothesis is an assumption or a theory about the characteristics of one or more variables in one or more populations.

What you want to know: Does the calibrating machine that sorts cherry tomatoes into packs need revision?The same question reframed statistically: Is the population mean for the distribution of weights of cherry tomato packages equal to 227 g (i.e., half a pound)?

• The statement being

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