Interval estimation for mean

Let (θl,θu) be a random interval. With an appropriate probability 1−α (confidence coefficient), we want to find values of θl and θu such that

P(θl≤θ≤θu)=1−α

We refer to (θl,θu) as a 100(1−α)% confidence interval (CI) for θ

Interpretation: on repeating sampling, there will be k CI's for θ, and θ will be covered by these CI's about 100(1−α)% of the time

To determine the confidence limits θl,θu, we use a statistic with a known distribution/parameters (Pivot Statistic)

If x¯ is the sample mean of a random sample from N(μ,σ2) and σ2 is known, then

CI=(x¯−Z1−α/2,x¯+Z1−α/2)wrong

If θ is a location parameter, then the interval estimate usually involves a difference

The MLE or a sufficient statistic is often a good place to start for finding θl and θu

Examples

Knowing σ2 from a normal distribution, but wanting to estimate the μ:

μ^=x¯=∑xinZ=x−μσ/n∼N(0,1), (a pivot with known params)P(μl≤μ≤μu)=1−αP(x¯−μuσ/n≤x¯−μσ/n≤x¯−μlσ/n)=1−αP(Z1−α2)μ^l=x¯−1.96σnμ^u=x¯+1.96σn

σ2 unknown

μ^=x¯,σ2=s2=1n−1∑(xi−x¯)2t=x¯−μs/n∼tn−1t-statistic is a pivot statisticP(μl≤μ≤μu)=1−αP(x¯−μs/n≤x¯−μs/n≤x¯−μs/n)=1−αCI=(x¯−t1−α/2sn,x¯+t1−α/2sn)

By CLT:

Z=x¯−μVar(x¯)=x¯−μσ/n,Z∼N(0,1) approx for big n≥25 ExampleX1,…,Xn∼Bin(N,p),CI for μ and p:μ=E(X)=np,Var(X)=σ2=np(1−p)μ^=x¯=∑xin,p^=μ^N=x¯N,E(μ^)=E(x¯)=μVar(μ^)=Var(X¯)=1n2nVar(X)=σ2n=Np(1−p)nE(p^)=E(μ^N)=1NNp=pVar(p^)=Var(X¯N)=1N2nVar(X)n2=1nN2Np(1−p)=p(1−p)nNP(μl≤μ≤μu)=1−αP(x¯−μuNp(1−p)n≤x¯−μNp(1−p)n≤x¯−μlNp(1−p)n)=1−αP(−Z1−α2≤N(0,1)≤Z1−α2)=1−αCI for μ=E(X) is (X¯−Z1−α2Np^(1−p^)n,X¯+Z1−α2Np^(1−p^)n)