!

"# %&#'()&**+(,-

"#$%&'( )*

0bseivation: A single membei of a collection of items that we want to stuuy such
as peison, fiim oi a iegion.
vaiiable: A chaiacteiistic of the subject oi inuiviuual, such as an eployee's income
oi an invoice amount.
Bata set: Consists all the values of all of the vaiiables foi all the obseivations we
have chosen to obseive.
0nivaiiate uata set: one vaiiable.
Bivaiiate uata set: two vaiiables.
Nultivaiiate uata set: Noie than two vaiiables.

./0/ *1234-
Categoiical Bata: Bave values that aie uesciibes by woius iathei than numbeis.
veibal Label: Example - vechile Type (!"#$ &#'()$ *+,).
Coueu(Binaiy): Example - vechile type (-$ .$ /).
Numeiical Bata: Aiise fiom counting, measuiing something, oi some kinu of
mathematical opeiation.
Bisciete: Example - Bioken eggs in a caiton (1,2,S,4.N).
Continuous: Example - Patient waiting time (14.22 Nin).

*563 %37534 ./0/- If each obseivation in the sample iepiesents a uiffeient equally
spaceu point in time. The peiiouicity is the time between obseivations (mothly, weekly,
yeaily, etc.).
87944:%3;059</= ./0/- If each obseivation iepiesents a uiffeient inuiviuual unit (e.g., a
peison, fiim, geogiaphic aiea) at the same point of time. Foi cioss-sectional uata we aie
inteisteu in vaiiation among obseivations. Foi example; uPAs of stuuents in a statistics
class.

>3?3=4 9@ 63/4A7363<0-
Nominal Bata: The only thing a nominal scale uoes is to say that items being
measuieu have something in common, although this may not be uesciibeu.
Nominal items may have numbeis assigneu to them. This may appeai oiuinal but is not
- these aie useu to simplify captuie anu iefeiencing.
Nominal items aie usually ("0123#4("5, in that they belong to a uefinable categoiy, such
as 'employees'.
0iuinal Bata: A ianming of uata values, but the uiffeience between values is
unknown. Example - Noouy's bonu iatings: Aaa, Aa, A, Baa, Ba, Caa.
Inteival Bata: Bata is not only iankeu but also has meaningful inteivals between
scale points. Example - Tempeiatuie in Celsius oi Fahienheit - 1u, 2u, Su.
Ratio Bata: Bave all the piopeities of the othei uatya types, but in auuition
possess a meaningful zeio that iepiesents the absence of quantity being measuieu.
Example - 2umillion piofit is twice as much as 1umillion piofit.

+,-' ./ 0#,12* 6718 071 9":;51 49 5199 07"0 <= 3> 071 ;3;'5"0438?8@ABCDC<E$ 0718 071
;3;'5"0438 4> 1>>1(04F15G 48>48401D

%/62=5<B #30C9D4-
Simple Ranuom Sample:
Systematic Sample:
Stiatifieu Sample:
Clustei Sample:
}uugment Sample:
Convinience Sample:
Focus uioups:

%9A7;34 9@ '7797-
Noniesponse Bias: Responuents uiffei fiom noniesponuents
Selection Bias: Self-selecteu iesponuents aie atypical
Response Eiioi: Responuents give false infoimation
Coveiage Eiioi: Incoiiect specification of fiame of population
Neasuiement Eiioi: 0ncleai suivey instiument woiuing
Inteiviewei Eiioi: Responses influenceu by inteiviewei
Sampling Eiioi: Ranuom anu 0navoiuable

./0/ %9A7;34- 0.S geneial uata, Batabases, Woilu uata, web, etc.
%A7E31 *1234- Nail, Telephone, Inteiviews, Web, Biiect 0bseivation.
%A7E31- State uoals of the ieseaich ! Bevelop buuget ! Cieat ieseach
uesign(population, fiame, sample sie) ! choose suivey type anu methou of
auministiation ! uesign a uata collction instiument (questionnaiie) ! pretest the survy
instrument and revise as needed ! administer the survey ! Code the data and analyze it.


























Chapter 5: Probability

5.1 Random Experiments

Random experiment: is an observational process whose results cannot be known in
advance. For example, when a customer enters a Shop, will he buy something or not? How
much will he spend? Etc.
Sample space(S): The set of all possible outcomes. For example the sample space to
describe rolling a die has six outcomes S={1,2,3,4,5,6}.

5.2 Probability:

Probability of an event os a number that measures the relative likelihood that the event
will occur. It is always a number between 0 1. 0!P(A)!1.
Empirical Probability: Estimated from observed outcome frequency. For
example there is a 2% chance of twins in a randomly chosen birth.
Classical Probability: Known a priori by the bature of the experiment. For
example the is a 50% chance of heads on a coin flip.
Subjective Probability: Based on informed opinion or judgment. For example
The is a 75% chance that England will adopt the euro currency by 2012.
Empirical Approach: Sometimes we can collect empirical data through observations or
experiments. We can use the empirical or relative frequency approach to addign probabilities
by counting frequency of observed outcomes (f) defined in our experimental sample space
and dividing by the number of observations (n). The estimated probability is f/n.
Law of large Numbers: As the number of trials increases, any empirical
probability approaches its theoretical limit.

Classical Approach: Statisticians use the term a priori to refer to the process of
assigning probabilities before we actually observe the eent or try an experiment. When
flipping a coin we do not actually have to perform an experiment because the nature of the
process allows us to envision the entire sample space.

Subjective Approach: A subjective probability reflects someones informed judgment
about the likelihood of an event.

5.3 Rules of Probability:

Complement of an Event: The complement of an event A is doneted A and consists of
eveything in the sample space S excepted event A. P(A) + P(A) = 1.
Union of Two event(A " B): The union of two events consists of all the outcomes in
the sample space S that are contained either in ebent A or in event B or in both.
Inteisection of Two Events(A # B): The inteisection of two events H anu I is the
event consisting of al outcomes in the sample space S that aie containeu in both event A
anu event B. Calleu also J3480 K#3L"L4540GD
3'4'($- 5$6 ./ 7889&9.4* says that the piobability of the union of two event H
anu I is the sum of theii piobabilities less the piobability of theii inteisection.
FG&"HIJFG&IKFGHI LFG&#HI



Nutually Exclusive Events: Events A anu B aie :'0'"55G 1M(5'94F1 (oi u49N3480) uf
theii inteisection is the empty set (A set that contains no elements. In othei woius, one
event piecluues the othei fiom occuiing.
%23;5/= >/M 9@ &DD5059<- if A anu B aie mutually exclusive events then
FG&"HIJFG&IKFGHI /<D FG&#HI"

Conuitiional Piobability: The piobability of event A given that event B has
occuiieu is a conuitional piobability uonateu P(A|B) which is ieau the piobability of A
given B. The conuitional piobability is the joint piobability of A anu B uiviueu by the
piobability of B !

!
P(A | B) =
P(A!B)
P(B)
.
,3<37/= >/M 9@ #A=052=5;/059<-

!
P(A!B) = P(A | B)P(B) .

0uus of an Event: We uefine the ouus in favoi of an event A as the iatio of the
piobability that event A will occui to the piobability that even A will not occui.
!
!
P(A)
P(A' )
=
P(A)
1" P(A)


N"O +<D323<D3<0 'E3<04-
When P(A) uiffeis fiom P(A|B) the events aie D32<D3<0" When knowing that Event B
has occuiieu uoes <90 effecit the piobability that event A will occui, then even A anu B
aie inuepenuent. Even A is inuepenuent of event B if the conuitional piobability P(A|B)
is the same as the unconuitional piobabiliy P(A)!FG&PHIJFG&I! +<D323<D3<0 'E3<04

N"N 89<05B3<;1 */?=34- Is a cioss-tabulation of fiequencies into iaws anu columns. The
nteisection of each iow anu column is a cell that shows a fiequency.
Naiginal Piobabilities: The maiginal piobability of an event is a ielative
fiequenct that is founu by uiviuing a 7/M 9@ / ;9=A6< 090/= by the 090/= 4/62=3
45Q3" Naiginal Piobability of event T1=1667
}oint Piobabilities: }oint piobability of event P(T1#SS)=167
%/=/71 B/5<!
*A5059<
%6/== G%RI #3D5A6 G%SI >/7B3 G%TI U9M *90/=
>9MG*RI N RV R RW
#3D5A6G*SI X RR R RY
Z+,ZG*TI N RS RN TS
89[A6< *90/= 17 TT RX WX
Conuitional piobabilities: P(S1|TS)=SS2


N"W *733 .5/B7/6-









N"X H/134 *C39736-
IF P(A) 0NKN0WN:
!
P(B | A) =
P(A | B)P(B)
P(A)
P(B | A) =
P(A | B)P(B)
P(A | B)P(B) + P(A | B' )P(B' )

ueneial Foim of Bayes' Theoiom:
!
P(B
1
| A) =
P(A | B
1
)P(B
1
)
p(A | B
1
)P(B
1
) + P(A | B
2
)P(B
2
) +... + P(A | B
n
)P(B
n
)


N"\ 89A<05<B UA=34-
Funuamental Rule of Counting: If event A can occui in n1 ways anu event B can
occui in n2 ways then even A anu B can occui in n1]n2 ways.
Factoiials: the numbei of unique ways that n items can be aiiangeu in a
paiticulai oiuei is n >"(03#4"5, the piouuct of all integeis fiom 1 to n.
n!=n*(n-1)*(n-2)*.1.
Peimutations: Choose i items at ianuom without ieplacement fiom a gioup of n
items. nPi=
!
n!
(n " r)!
nCr =
n!
r!(n " r)!

F376A0/059<4 97 896?5</059<4^ Both calculate the numbei of ways we coulu
choose i items fiom n items. But in peimutations oiuei is impoitant while in
compinations oiuei uoes not mattei. The numbei of peimutations nPi always is
at least as gieat as the numbei of combinations nCi in a sample of i items chosen
at ianuom fiom n items.





















8C/20373 W- .54;303 F79?/?5=501 .54075?A059<4-

W"R .54;303 .54075?A059<4-
Ranuom vaiiables: is a function oi iule that assigns a numbeiical value to
each outcome in the sample space of a ianuom expeiiment. We use X
when ieffeiing to a ianuom vaiiable in geneial.
Bisciete ianuom vaiiable has a countable numbei of uistinct value.

F79?/?5=501 .54075?A059<4-
Bisciete piobability uistiibution assigns a piobability to each value
of a uisciete ianuom vaiiable X.
!
0 " P(X
i
) "1
P(X
i
) =1
i=1
n
#

Expecteu value: The sum of all X-values weighteu by theii
iespective piobabilities.
!
E(X) = = X
i
P(X
i
)
i=1
N
"

vaiiance: vaiiance of a uisciete ianuom vaiiable is the sum of the
squaieu ueviations about its expecteu value, weighteu by the
piobabiliti of each X-value. If theie aie N uistinct values of X, the
vaiiance is:
!
Var(X) ="
2
= [X
i
# ]
2
P(X
i
)
i=1
N
$

Stanuaiu Beviation: the squaie ioot of the vaiiance anu is uenoteu:
!
" = "
2
= Var(X)

PBF anu CBF: a uisciete Puf shows the piobability of each X-value,
while CBF shows the cumulative sum of piobabilities, auuing fiom
the smallest to the laigest X-value.

W"S _<5@976 .54075?A059<- Each value is equally likely. All chances aie equal.
Paiameteis: a-lowei limit ! b- uppei limit.
PBF:
!
P(X = x) =
1
b " a +1

CBF:
!
P(X " x) =
x # a +1
b # a +1

Bomain: x=a,a+1,a+2,.,b
Nean:
!
a +b
2

Stanuaiu Beviation:
!
[(b " a) +1]
2
"1
12

Ranuom uata geneiation in Excel: =Ranubetween(a,b)






H37<9A==5 .54075?A059<- A ianuom expeiiment that has only two outcoms. To
cieate a ianuom vaiiable, we aibitiaiily call one outcome a succes (uenoteu X=1)
anu the othei a failute (uenoteu X=u).
!
E(X) =1"#
VAR(X) = [X
i
$ E(X)]
2
P(X
i
)
i=1
2
%

H5<965/= .54075?A059<- Aiises when a Beinoulli expeiiment is iepeateu n times.
Each Beinoulli tiial is inuepenuent so that the piobability of success
!
" iemains
constant on each tiial.
Paiameteis:
!
" = piobability of succes, N=numbei of tiials
Nean:
!
Mean = = n "#
Stanuaiu ueviation:
!
" = n #$ #(1%$)
PBF:
!
P(X = x) = (
X
N
)(")
X
(1#")
N#X

Bomain: x=u,1,2.N
Excel PBF: BIN0N.BIST(X,N,
!
", u)
Excel PBF: BIN0N.BIST(X,N,
!
", 1)
Ranuom Bata geneiation: Ciitbinom(n,
!
", Ranu())
Comments: Skeweu iight if
!
"<u.Su, skeweu left if
!
">u.Su anu symmetiic
if
!
"=u.Su

U3;9B<5Q5<B H5<965/= &22=5;/059<4-
Theie aie fixeu numbei of tiials (n)
Theie aie only two outcomes foi each tiial: succes oi failuie.
The piobability of succes foi each tiial iemains constant.
The tiials aie inuepenuent of each othei.
The ianuom vaiiable X is the numbei of successes.

F95449< .54075?A059<- uesciibes the numbei of occuiiences within a ianuomly
choses unit of time. We often call the Possion Bistiibution the mouel of aiiivals
(customeis, uefects, acciuents). Aiiivals can ieasonably be iegaiueu as Posson
events if each event is inuepenuent.
Paiametei:
!
" ! mean aiiivals pei unit of time oi space
Nean:
!
"
Stanuaiu Beviation:
!
"
PBF:
!
P(X = x) =
"
x
e
#"
x!

Bomain: u,1,2,..(no obvious uppei limit).
Excel PBF: P0ISS0N.BIST(X,
!
", u)

Excel CBF: P0ISS0N.BIST(X,
!
", u)
Comments: Always iight-skeweu, but less so foi laigei
!
".
U3;9B<5Q5<B F95449< &22=5;/059<-
An event of inteiest occuis ianuomly ovei time of space
The aveiage aiiival iate iemains constant
The aiiivals aie inuepenuent of each othei
The ianuom vaiiable X is the numbei of events within an obseiveu
time inteival.
F95449< &2279`56/059< 09 H5<965/=- The Poisson uistiibution may be useu to
appioximate a binomial by setting -
!
" = n#. This appioximation is helpful when the
binomial calculation is uifficult (when n is laige). The iule foi a goou appioximation is
that n shoulu be "laige" anu the chance shoulu be small. A common iule of thumb says
the appioximation is auequate if
!
n "20
en
# $ # % & 0.05.

W"W Z1237B3963075; .54075?A059<- is similai to the binomial except that sampling is
O4073'0 #1;5"(1:180 fiom a finite population of N items. Theiefoie, the tiials aie not
inuepenuent anu the piobability of succes is not constant fiom tiial to tiial.

Paiameteis: N=numbei of items in the population; n=sample size; s=numbei of
succes in population.
Nean:
!
n" #" =
s
N

Stanuaiu ueviation:
!
n"(1#")
N # n
N #1

Puf:
!
P(X = x) =
sCx "N # sCn # x
NCn

Bomain:
!
max(0, n " N + s) # X # min(s, n)
Excel PBF: BYPuE0N.BIST(x,n,s,N,u)

!
s
C
x
=Numbei of was to choose x successes fiom s successes in the population.
!
N"s
C
n"x
= Numbei of ways to choose n-x failuies fiom N-s failuies in the
population.
!
N
C
n
= Numbei of ways to choose n items fiom N items in the population

Recognizing Bypeigeometiic Applications: Look foi a finite poplation N
containing a known numbei of successes s anu sampling without ieplacement (n
items in the sample) wheie the piobability of succes is not constant foi each
sample item uiaws.
H5<965/= &2279`56/059< 09 0C3 Z1237B3963075;- If nN<u.uS, it is safe to use the
binomial appioximation to the Bypeigeometic, using sample size n anu success
piobability !
!
" = s/ N

W"X ,3963075; .54075?A059<-
The ueomtetiic Bistiibution is ielateu to the binomial. It uesciibes the numbei of
Beinoulli tiails until the fiist succes is obseiveu. But the numbei of tiials is not fixeu. We
uefine X as the numbei of tiials until the fiist success anu
!
" as the constant piobability
of a success on each tiials.

Paiametei:
!
"=piobability of success
Nean: 1
!
"
Stanuaiu Beviatin:
!
1"#
#
2

Bomain: x=1,2,.
PBF:
!
P(X = x) = "(1#")
x#1

CBF:
!
P(X " x) =1#(1#$)
x

Comment: Bighly Skeweu
%A6 9@ U/<D96 )/75/?=34- If X anu Y aie inuepenuent:
!

x+y
=
x
+
y

!
"
x+y
= "
x
2
+"
y
2

If X anu Y aie not inuepenuent:
Covaiiance:
!
"
x+y
= "
x
2
+"
y
2
+2"
XY
"
XY
=
(X
i
#
x
)(Y
i
#
Y
)
i=1
N
$
N








































89<05<A9A4 F79?/?5=501 .54075A059<4-

X"R .34;75?5<B & 8a(*+(_a_% .54075?A059<- A piobability uistiibution can be
uescibeu eithei by its PBF oi by its CBF. Foi a continuous ianuom vaiiable, the PBF is an
equation that shows the height of the cuive f(x) at each possible value of X. any
continuous PBF must be nonnegative anu the aiea unuei the entiie PBF must be 1.
The mean, vaiiance anu shape of the uistiibution uepenu on the PBF anu its paiameteis.
The CBF is uenoteu F(x) anu shows
!
P(X " x), the cumulative aie to the left of a given
value of X.
F79?/?5=50534 &4 &73/4- With uisciete ianuom vaiiables, we take sums of
piobabilities ovei gioups of points. But continuous piobability functions aie smooth
cuives, so 0C3 /73/ /0 /<1 295<0 M9A=D ?3 Q379. Insteau of taking sums of piobabilities,
we speak of aieas unuei cuives.
'`23;03D )/=A3 /<D )/75/<;3- the mean anu vaiiance of continuous ianuom
vaiiable aie analogous to E(X) anu vai(X) foi a uisciete ianuom vaiiable, except that the
integial sign
!
"
ieplaces the summation sign
!
"
. The mean is till the balancing point
foi the entiie uistiibution, anu the vaiiance is still a measuie of uispeision about the
mean. The mean is still the aveiage of all X-values weighteu by theii piobabilities, anu
the vaiiance is still the weighteu aveiage of all squaieu ueviations aiounu the mean. The
stanuaiu ueviation is still the squaie ioot of the vaiiance.

Continous Ranuom vaiiable Bisciete Ranuom vaiiable
Nean
!
E(X) = = xf (x)dx
"#
+#
$

!
E(X) = = xP(X)
ALL(X )
"

vaiiance
!
VAR(X) ="
2
= (X # )
2
f (x)dx
#$
+$
%

!
VAR(X) ="
2
= [x # ]
2
P(x)
all(X )
$



X"S _<5@976 89<05<A9A4 .54075?A059<- If X is a ianuom vaiiable that is unifoimly
uistiibuteu between a anu b, its PBF has a constant height. The continiuous unifoim
uistiibution is similai to the uisciete unifoium uistiibution if the x values covei a wiue
iange. The unifoim mouel 0(a,b) is useu only when you have no ieason to imagine that
any X values aie moie likely than otheis.
Paiameteis: a=lowei limit; b=uppei limit.
Nean:
!
a +b
2

Stanuaiu ueviation:
!
(b " a)
2
12

Bomain:
!
a " x " b

PBF:
!
f (x) =
1
b " a

CBF:
!
P(X " x) =
x # a
b # a

Shape: Symmetiic with no moue.
Chance between two points(B,C):
!
d "c
b " a

X"T (976/= .54075?A059<-
Paiameteis:
!

=population mean;
!
"
= population stanuaiu ueviation.
Nean:
!

Stu. Beviation:
!
"

Bomain:
!
"# < x < +#

PBF:
!
f (x) =
1
s 2"
e
#
1
2
(
x#
$
)
2

PBF IN EXCEL:
!
NORM.DIST(x, ,",0)

CBF IN Excel:
!
NORM.DIST(x, ,",1)


X"O %0/<D/7D <976/= .54075?A059<- We tiabsfoim the vaiiable by subtiacting the
mean anu uiviuing by the stanuiu ueviation to piouuce a stanuaiuizeu vaiiable.
!
x "
#
= z

Paiameteis:
!

=population mean;
!
"
= population stanuaiu ueviation.
Nean:
!

Stu. Beviation:
!
"

Bomain:
!
"# < x < +#

Shape: Stmmetiic, mesokuitic, anu bell-shapeu.
Comment: Theie is no simple foimula foi a noimal CBF so we neeu noimal tables
oi Excel to finu aieas.
X"N (976/= &2279`56/059<4-
(976/= &2279`56/059< 09 0C3 H5<965/=-
We have seen that binomial piobabilities may be uiffiult to calculate when n is laige,
paiticulaiy when many teims must be summeu. Insteau we can use the noimal
appioximation.
As a iule of thumb, when
!
n" #10
anu
!
n(1"#) $10
it is safe to use the noimal
appioximation to the binomial.
!
= n"
# = n"(1$")

(976/= &2279`56/059< 09 0C3 F95449<- The noimal appioimation foi the Poisson
woiks best when
!
"
is laige. If you can't finu
!
"
in a table, you aie ieasonably safe in
using the noimal appioximation.
!
= "
# = "








X"W '`29<3<05/= .54075?A059<- If poisson uistiibution is the numbei of occuiences
within a ianuomly chosen unit of time, The exponential uistiibution is the measuie of
the time between two successes.
Paiametei:
!
"
= mean aiiival iate pei unit of time oi space(same as poisson)
Nean:
!
1
"

Stanuaiu ueviation:
!
1
"

Bomain: X$u
PBF:
! !
F(X) = "e
#"x

CBF:
!
P(X " x) =1#e
#$x

Shape: Always iight-skeweu.
CBF IN EXCEL:
!
Expon.dist(x, ",1)

Comments: Waiting time is exponential when aiiivals follow a poisson mouel.
Left TAIL exponential Aiea:
!
P(X " x) =1#e
#$x
=CBF
Right TAIL aiea:
!
e
"#x

Example page 279 book.
Nean Time Between Events: Exponential waiting times aie often uesciibeu in
teims of the mean time between events(NTBE) iathei than in teim of Poisson aiiivals
pei unit of time. In othei woius we might be given 1% insteau of %.
NTBE=1% =Nean time between events(units of time pei event).
1NTBE=%=Nean events pei unit of time(events pei unit of time).

X"X *U+&(,_>&U .54075?A059<




















8C/2037 \- %/62=5<B .54075?A059<4 &<D '4056/059<-

\"R %/62=5<B )/75/059<- A sample statistic is a #"8P3: F"#4"L51 whose value uepenus
on which population items happen to be incluueu in the ianuom sample. Some samples
may iepiesent the population well, while othei samples coulu uiffei gieatly fiom the
population (specially if sample size is small).

\"S '4056/0974 /<D %/62=5<B '7797-
!'4056/0974- An estimatoi is a statistic ueiiveu fiom a sample to infei the value of a
population paiametei. An 34056/03 is the value of the estimatoi in a paiticulai sample.
We usually uenote a population paiametei by a loweicase lettei uieek, The
coiiesponuing sample estimatoi is usually a Roman lettei oi a uieek lettei with a "hat".
Estimatoi Foimula Paiametei

Sample mean
x =
1
n
Xi
i=1
n
!
wheie Xi= the
ith uata value

Sample piopoition
P=xn wheie x is the
numbei of successes in the
sample anu n is the sample
size.
!



Sample Stanuaiu ueviation
s=
(X
i
! x)
2
n
"
n !1
!


! %/62=5<B '7797- Ranuom samples, vaiy so an estimatoi is a ianuom vaiiable. The
sampling eiioi is the uiffeience between an estimate anu the coiiesponuing population
paiamets. Foi example foi the population mean Sampling Eiioi =
x !
.. Sampling eiioi
exists because uiffeient samples will yielu uiffeien value foi
x
uepenuing on which
population items happen to be incluueu in the sample.
!H5/4- The bias is the uiffeience between the E(x) of the estimatoi anu the tiue
paiametei. Bias=
E(X) !
. An estimatoi is uniaseu if the expecteu value is the
paiametei being estimateu. We say
x
is an unbiaseu estimate of

because
E(X) =
.
Theie can be sampling eiioi in a paiticulai sample, but an unbiaseu estimatoi neithei
oveistats noi unuei the tiue paiametei on aveiage. Sampling eiioi is ianuom wheieas
bias is symmetiic.
!'@@5;53<;1- iefeis to the vaiiance of the estimatoi's sampling uistiibution Smallei
vaiiance means a moie efficient estimatoi. Among all unbiaseu estimatois, we piefei the
minimum vaiiance estimatoi.(0nbiaseu piecise). A moie efficient estimatoi is closei on
aveiage to the tiue value of the paiametei.


!89<45403<;1- A consistent estimatoi conveiges towaius the paiametei eing estimateu
as the sample size incieases. That is, the sampling uistiibution collapses on the tiue
paiametei. Foi a laigei samples, we get closei to the ieal values.

\"T %/62=5<B #3/< /<D 0C3 83<07/= >5650 *Z'aU'#- The sampling
uistiibution of an estimatoi is the piobability uistiibution of all possible values the
statistic may assume when a ianuom sample of size n is taken. An estimatoi has a
piobability uistiibution with a mean anu vaiiance.
E(X) =
Anu the :&$48$(8 '((.( ./ &#' 1'$4 9;*
!
x
=
!
n . The stanuaiu eiioi of the
mean uecieases as the sample size incieases.

!83<07/= >5650 *C39736 b97 / 63/<- If a ianuom sample of size n is uiawn fiom a
population with mean

anu stanuaiu ueviation

!
, the uistiibution of the sample mean
x
appioaches a noimal uistiibution with mean

anu a stanuaiu ueviation

!
x
=
!
n as
the sample size incieases!
The Cential Limit Theoiem (CLT) is a poweiful iesult that allows us to appioximate the
shape of the sampling uistiibution of
x
even when we uon't know what the population
looks like.

!&22=15<B 0C3 ;3<07/= =5650 0C39736- The CLT peimits us to uefine an inteival
whithin which the sample means aie expecteu to fall. As long as the sample size n is
laige enough, we can use the noimal uistiibution iegaiuless of the population shape (oi
any n if the population is noimal to begin with).
'23;03D U/<B3 9@ %/62=3 63/<4-
z
!
n

! %/62=3 %5Q3 %0/<D/7D '7797- Even if the population stanuaiu ueviation
!
is
laige, the sample means will fall within a naiiow inteival as long as n is laige. The key is
the stanuaiu eiioi of the mean.
!
x
=
!
n . The stanuaiu eiioi uecieases as n incieases.

\"O 89<@5D3<;3 +<037E/= @97 / 63/< M50C [<9M<