17

Point Estimate

A point estimate is a single number, calculated from the obtained sample data,
which is used to estimate the value of an unknown population parameter.

17.1

Point Estimate of the Population Mean

Very often, the mean of a very large population is unknown, and we would like
to estimate it.
Mathematically, for a given distribution with unknown mean and variance 2,
we would like to estimate the mean based on n random samples {X1, X2, . . . , Xn},
where all the independent and identically distributed Xi follow the same given distribution.
We shall derive a point estimate of the unknown mean , which is defined as a
single value estimate for this population parameter.

A very good point estimate of the population mean is the sample mean
n

1
=
X
Xi.
n i=1
Remark 1. We have

1
1
=
E[Xi] = (n) = .
E[X]
n i=1
n
n

is equal to the unknown mean , it is also called an

Since the expected value of X
unbiased estimator of .
Remark 2. We also note that
2

1
2
=
V
ar(X
)
=
(n
)= .
V ar(X)
i
n2 i=1
n2
n
n

Thus we know that if 2 is finite then

= 0.
lim V ar(X)

17.2

Point Estimate of the Population Variance

Very often, the variance of a very large population is unknown, and we would like
to estimate it.
Mathematically, for a given distribution with mean and unknown variance 2,
we would like to estimate the variance 2 based on n random samples {X1, X2, . . . , Xn},
where all the independent and identically distributed Xi follow the same given distribution.
To estimate the population variance, we have to deal with the following two cases.
In the first case, we assume that the population mean is known. In this case a
good point estimate of the population variance is
1
2
(Xi )2.
W =
n i=1
n

Remark 3. We have
1
1
2
E[(Xi )2] = (n 2) = 2.
E[W ] =
n i=1
n
n

So, W 2, the sample variance, is an unbiased estimator of 2, since its mean

is equal to 2.
Remark 4. For the variance of the estimator W 2, we note that
)
( n

1
2
V ar(W ) = 2 V ar
(Xi )2 .
n
i=1
Therefore we have

(
(
) 1
)
n
2
2
V ar(W ) = 2 V ar (X1 ) = V ar (X1 ) ,
n
n
where we have used the facts that
)
( n
n

(
)
2
2
V ar (Xi )
V ar
(Xi ) =
2

i=1

i=1
4

as all Xi are independent, and that

(
)
(
)
(
)
2
2
2
V ar (X1 ) = V ar (X2 ) = = V ar (Xn )
as all Xi are identically distributed.
Now, using the identity
V ar(Y ) = E[Y 2] E 2[Y ]
with Y = (X1 )2, we have
V ar((X1 )2) = E[(X1 )22] E 2[(X1 )2]
= E[(X1 )4] 4,
which immediately implies
4
4
E[(X

)
]

.
V ar(W 2) =
n
Now, we are ready to conclude that if 4 and E[(X )4] are finite, then

lim V ar(W 2) = 0.

In the second case, we assume that the population mean is unknown. In this
case a good point estimate of the population variance is
1
2
2,
S =
(Xi X)
n 1 i=1
n

where X =
Xi .
n i=1
n

For this estimator, we have

]
[ n

1
2
E[S 2] =
E
(Xi X)
n1
i=1 [
]
(
)
n
2
X1 + X2 + + (1 n)Xi + + Xn
1
E
=
(n 1) i=1
n
n
2
=
E[((1

n)X
+
X
+

+
X
)
]
1
2
n
2
(n 1)n
(
)
1
2
=
V ar((1 n)X1 + X2 + + Xn) + E [(1 n)X1 + X2 + + Xn]
(n 1)n
(n 1)2 2 + (n 1) 2 + 02
= 2.
=
(n 1)n
So, S 2, the sample variance, is an unbiased estimator of 2.
6

18

Interval Estimate

is a random variable and in the

We should note that the sample mean X
following we will introduce the concept of confidence interval for the mean ,
which is a random interval.
18.1

Case of Known Variance 2

Suppose a random sample X1, X2, , Xn of size n is drawn from a population

of unknown mean and known variance 2. Then according to the central
limit theorem, for large n, the random variable

X

Z=
(18.1)
/ n
approximately follows the standard normal distribution N (0, 1), where
= X1 + X2 + + Xn
X
n
is the sample mean.

(18.2)

For a particular given confidence level = 1 (for example, can be 0.90, 0.95
and 0.99), we can first solve Z/2 from the following equality:

(
)
X 
P   Z/2 = ,
/ n
and then give the 100% confidence interval (C.I.) for the mean as
follows:
[
]

Z/2 , X
+ Z/2 .
X
n
n
To see this, note that

is equivalent to




X
  Z/2
 / n 

+ Z/2 .
Z/2 X
X
n
n

Here, we remark that is an unknown constant but NOT a random variable; on

the other hand, the lower and upper bounds of are random variables.
8