CHAPTER 1

ESTIMATION

Definition. Statistical Inference refers to methods by which one uses sample

information to make inferences or generalizations about a population.

Two Areas of Statistical Inference

1. Estimation
Point estimation
Interval estimation
2. Hypothesis Testing

1.1 Basic Concepts in Estimation

Point Estimation
Definition. An estimator is any statistic whose value is used to estimate an
unknown parameter. A realized value of an estimator is called an estimate.

Example. The sample mean , is an estimator of the population mean .

An estimator is said to be unbiased if the average of the estimates it produces under

repeated sampling is equal to the true value of the parameter being estimated.

Example. Under random sampling, the sample mean is unbiased estimator of the
population mean, that is () = .

Example. Under random sampling with replacement, 2 , is an unbiased estimator of

2 , but S on the other hand is a biased estimator of with the bias becoming
insignificant for large samples.

A parameter can have more than one unbiased estimator. Naturally, the unbiased
estimator with the smallest variance would be more preferred.

Interval Estimation

Definition. An interval estimator of a population parameter is a rule that tells us how

to calculate two numbers based on sample data, forming an interval within which
the parameter is expected to lie. This pair of numbers, (a, b), is called an interval
estimate or confidence interval.

CONFIDENCE INTERVAL (interval estimate) is a range (or an interval) of values that

is likely to contain the true value of the population parameter. It is associated with a
degree of confidence, which is a measure of how certain you are that the interval contains
the population parameter. The degree of confidence is the probability 1 that the
interval contains the true parameter. Common choices for the degree of confidence are
90% (with = 0.10), 95% (with = 0.05) and 99% (with = 0.01). The most
common is the 95% because it provides a good balance between precision and reliability.

CRITICAL VALUE is the number on the borderline separating sample statistics that are
likely to occur from those that are unlikely to occur. It is also known as the tabular value.

Example
Find the critical value of Z ( ) corresponding to a
2
a. 95% degree of confidence
b. 90% degree of confidence
c. 99% degree of confidence

MARGIN OF ERROR (E) is the maximum likely (with probability1 ) difference

between the observed sample mean and the true value of the population mean . It is
also called the maximum error of estimate.

Example. The running time (in minutes) of a sample of films produced by a film
production outfit are as follows: 103 94 110 87 98

A 95% (0.95) confidence interval for the mean running time of films produced by
the film production outfit is (87.6, 109.2).

The number 0.95 in the example is called the confidence coefficient or the
degree of confidence.
The endpoints 87.6 and 109.2 are called the lower and upper confidence
limits.

Remarks:

1. In general, we construct a (1 )100% confidence interval. The fraction

(1 ) is called the confidence coefficient, and the endpoints a and b are
called lower and upper confidence limits, respectively.

2. Interpretation of (1 )100% confidence interval:

If we take repeated samples of size n and if for each one of these samples we
compute the (1 )100% confidence interval then (1 )100% of the
resulting confidence intervals will contain the unknown value of the
parameter.

3. The confidence coefficient is not the probability that the true value of the
parameter falls in the interval estimate since once a sample is drawn and a
confidence interval constructed, the resulting interval estimate either
encloses the true value of the parameter or it does not. Rather, the
 confidence coefficient is the probability that the interval estimator encloses
the true value of the parameter.

4. A good confidence interval is one that is as narrow as possible and has a large
confidence coefficient, near 1. The narrower the interval, the more exactly we
have located the parameter; whereas, the larger the confidence coefficient,
the more confidence we have that a particular interval encloses the true
value of the parameter. However, for a fixed sample size, as the confidence
coefficient increases, the length of the interval also increases, the length of
the interval also increases.

Estimating the Mean

A point estimator of the population mean is the sample mean, .

(1 )100% Confidence Interval for

a. When is known

( , + )
2 2

where is the z-value leaving an area of to the right
2 2

b. When is unknown

( , + )
2 2

where is the t-value with n-1 degrees of freedom.

2

Remarks:

1. The above formulas hold strictly for random samples from a normal
distribution. However, they provide good approximate (1 )100%
confidence intervals when the distribution is not normal provided the
sample size is large, i.e. n>30.
2. If 2 > 30,

( , + )
2 2
Examples
1. A study of 40 bowlers showed that their average is score was 186. The standard
deviation of the population is 6.
a) Find the 95% confidence interval of the mean score for all bowlers.
b) Find the 99% confidence interval of the mean score of a sample of 100
bowlers.
2. The dean of a university wishes to estimate to average age of students presently
enrolled. From past studies, the standard deviation is known to be 2 years. A
sample of 50 students is selected, and the mean is found to be 19.2 years. Find the
99% confidence interval of the mean.
3. A sample of 60 days showed that a fast food restaurant served an average of 182
costumers during lunch. The standard deviation is 8. Find the 95% confidence
interval for the mean.
4. Find using the following information:
2
a. n=16 for a 99% confidence interval
b. n=20 for a 95% confidence interval
c. n=25 for a 90% confidence interval
d. n=12 for a 99% confidence interval
e. n=10 for a 95% confidence interval
5. For a group of 10 students subjected to a stress situation the mean number of
heartbeats/minute was 126 and the standard deviation was 4. Find the 95%
confidence interval for the true mean.
6. The average hemoglobin reading for a sample of 18 students was 20 grams/100
ml, with a sample standard deviation of 4 grams. Find the 99% confidence
interval for the true mean.
7. For a sample of 24 operating rooms in a hospital, the mean level of noise was 41.6
decibels, and the standard deviation was 7.5. Find the 95% confidence interval of
the true mean of the noise level in the operating rooms.
8. Regular consumption of presweetened cereals contribute to tooth decay, heart
disease, and other degenerative disease, according to a study. In a random sample
of 20 similar servings of Alpha-Bits, the mean sugar content was 11.3 grams with
a standard deviation of 2.45 grams. Assuming that the sugar content is normally
distributed, construct a 95% confidence interval for the mean sugar content for
single servings of Alpha-Bits.

Critical Values of Z
Level of Significance
0.10 0.05 0.025 0.01
One-tailed 1.28 1.645 1.96 2.33
Two-tailed 1.645 1.96 2.33 2.58

NOTE: PLEASE BRING TO CLASS TOMORROW A COPY OF THIS LECTURE

AND THE t-distribution table.