Inference About a Population Variance

Sometimes we are interested in making inference

about the variability of processes.
Examples:
Investors use variance as a measure of risk.
To draw inference about variability, the parameter
of interest is s2.

1
Inference About a Population Variance
The sample variance s2 is an unbiased, consistent and
efficient point estimator for s2.
(n 1)s 2
The statistic 2
has a distribution called Chi-
s
squared, if the population is normally distributed.

(n 1)s 2
2 2
d.f . n 1
d.f. = 5 s

d.f. = 10
2
 Testing and Estimating a Population
Variance
From the following probability statement
P(21-a/2 < 2 < 2a/2) = 1-a
we have (by substituting 2 = [(n - 1)s2]/s2.)

(n 1)s 2 (n 1)s 2
s2
2a / 2 12a / 2

3
Testing the Population Variance
Example
H0: s2 = 1
H1: s2 <1

( n 1 ) s 2

The test statistic is

2
.
s 2

The rejection region is 1a ,n1

2 2

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Inference about Two Populations

Variety of techniques are presented whose

objective is to compare two populations.

We are interested in:

The difference between two means.
The ratio of two variances.

5
13.2 Inference about the Difference
between Two Means: Independent
Samples
Two random samples are drawn from the two
populations of interest.
Because we compare two population means, we
use the statistic x1 x 2.

6
The Sampling Distribution of x1 x 2
1. x1 x 2 is normally distributed if the (original)
population distributions are normal .

2. x1 x 2 is approximately normally distributed if

the (original) population is not normal, but the
samples size is sufficiently large (greater than 30).
3. The expected value of x1 x 2 is m1 - m2

4. The variance of x1 x 2 is s12/n1 + s22/n2

7
Making an inference about m m
If the sampling distribution of x1 x 2 is normal or
approximately normal we can write:

( x 1 x 2 ) (m m )
Z
s s

n1 n2

Z can be used to build a test statistic or a

confidence interval for m1 - m2
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Making an inference about m m
Practically, the Z statistic is hardly used,
because the population variances are not known.

( x 1 x 2 ) (m m )
Zt
sS1
?

2 s
S
?

2
2

n1 n2

Instead, we construct a t statistic using the

sample variances (S12 and S22).
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Making an inference about m m

Two cases are considered when producing the

t-statistic.
The two unknown population variances are equal.
The two unknown population variances are not equal.

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 Inference about m m: Equal variances

Calculate the pooled variance estimate by:

The pooled ( n 1) s 2
( n 1) s 2
n2 = 15
Variance S p2 1 1 2 2 n1 = 10

estimator n1 n2 2 S 2
1
S p2 S 22

Example: s12 = 25; s22 = 30; n1 = 10; n2 = 15. Then,

(10 1)( 25) (15 1)( 30)

Sp
2
28.04347
10 15 2
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 Inference about m m: Equal variances
Construct the t-statistic as follows:
( x1 x 2 ) (m m )
t
2 1 1
sp ( )
n1 n2
d.f . n1 n2 2
Perform a hypothesis test Build a confidence interval
H0: m m = 0
H1: m m > 0 1 1
( x1 x 2 ) t a sp ( )
2

n1 n2
or < 0 or 0 where ais the confidence level.
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Inference about m m: Unequal variances

( x1 x2 ) ( m m )
t
s12 s 22
( )
n1 n2

( s12 n1 s 22 / n2 ) 2
d.f. 2
( s12 n1 ) 2
( s 22 n2 )

n1 1 n2 1

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Inference about m m: Unequal variances

Conduct a hypothesis test

as needed, or,
build a confidence interval

Confidence interval

s12 s22
( x1 x2 ) ta 2 ( )
n1 n2
where a is the confidence level

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Inference about the ratio of two variances

In this section we draw inference about the ratio

of two population variances.
This question is interesting because:
Variances can be used to evaluate the consistency
of processes.
The relationship between population variances
determines which of the equal-variances or unequal-
variances t-test and estimator of the difference
between means should be applied
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 Parameter and Statistic
Parameter to be tested is s12/s22
2 2
s s
Statistic used is F 1
2
1
2
s s 2 2

Sampling distribution of the statistic

The statistic [s12/s12] / [s22/s22] follows the F distribution with
n1 = n1 1, and n2 = n2 1.

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 Parameter and Statistic
Our null hypothesis is always

H0: s12 / s22 = 1

S12/s12
Under this null hypothesis the F statistic F = 2 2
S2 /s2
becomes
2
s
F 1
2
s 2
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