ECON1203: StatisticsChapter 8: Continuous probability distributions

ECON1203: Statistics
Chapter 8: Continuous probability
distributions
1. Requirements of probability density functions
1.

f ( x ) 0 [ for all a<x <b ]

2.

The total area under the curvebetween ab is 1.

2. Uniform probability density function

1.
2.

f ( x )=

1
[ wherea x b ]
ba

P ( x1 < X < x2 ) =( x 2x 1 )

1
ba

3. Normal density function

The probability density function of a normal random variable is:

1
f ( x )=
e
2

1 x
2

( )

[ < x < ]

Increasing the mean shifts the function to the right.

Decreasing the mean shifts the function to the left.

Increasing

Decreasing

Finding values of

widens the curve.

narrows the curves.

P ( Z > Z A )= A

ECON1203: StatisticsChapter 8: Continuous probability distributions

4. Exponential distribution
Exponential probability density function

f ( x )= ex [x 0]
Mean and standard deviation are equal

==

Probability
1.

P ( X > x )=e x

2.

P ( X < x )=1e x

3.

P ( x1 < X < x2 ) =P ( X < x 2 )P ( X < x 1 )=e

x 1

5. Student
Student

x 2

distribution

distribution
v+1
2

[ ]

[ ( +1 ) 2]
t2
f ( t )=
1+

( 2)

It is symmetrical about

The Student

0 .

distribution is wider than the standard normal

distribution.

( ) , the narrower the Student

The larger the degree of freedom

distribution.

Mean and variance

1.
2.

E ( t ) =0
V ( t )=

v
[ for v >2 ]
v2

values

ECON1203: StatisticsChapter 8: Continuous probability distributions

Area to the right:

Area to the left:

P ( t>t A , v )= A
P ( t<t A , v ) = A

Excel
To determine Student

probabilities, type:

TDIST ( [ x ] , [ ] , [ Tails ] )

x> 0

=degrees of freedom

( Tails=1 ) Area the of x

( Tails=2 ) Area the x

To determine

t A , type:

TDIST ( [ 2 A ] , [ ] )

6. Chi-squared distribution
Chi-squared density function

f ( 2) =

1
( v 2)

(v 2)1 2
1
( 2)
e
[ for 2 >0 ]
v 2
2

)( )

Increasing the degrees of freedom flattens the function.

Mean and variance

E ( 2 )=

V ( 2 )=2 v

values

Area to the right:

Area to the left:

P ( 2 > 2A ) = A
P ( 2 < x 21A ) =A

Excel
3

ECON1203: StatisticsChapter 8: Continuous probability distributions

To calculate

P( 2 > x) , type:

CHIDIST ( [ x ] , [ ] )

To calculate

CHIINV ( [ A ] , [ ] )

7.
F

A , v , type:

distributions

density function

+
2
F
(
)
v
2
2
f ( F )=
(
)

F
( ) ( )
1+
(
2
2
)
1

v1
1 2

1+ 2
2

Mean and variance

E ( F)=

v2
[v > 2]
v 22 2
2

V ( F )=

2 v 2 ( v 1+ v 22)
2

v 1 ( v2 2 ) (v 24)
F

Determining values of

Area to the right:

Area to the left:

[v 2 >4 ]

P ( F> F A , v

P ( F< F 1 A , , )= A

F1 A , , =

,v 2

) =A

1
F A,

, 1

Excel
To calculate probability, type:

[ F >0 ]

ECON1203: StatisticsChapter 8: Continuous probability distributions

[ X ] , [ 1 ] ,[ 2]
FDIST

To calculate

F A ,

, 2

, type:

FINV ( [ A ] , [ 1 ] , [ 2 ] )