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1 Session 7 Standard errors, Estimation and Confidence Intervals.

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1 1 Session 7 Standard errors, Estimation and Confidence Intervals

2 2 By the end of this session, you will be able to explain what is meant by an estimate of a population parameter, and its standard error explain the meaning of a confidence interval calculate a confidence interval for the population mean using sample data, and state the assumptions underlying the above calculation Learning Objectives

3 3 Inference is about drawing conclusions concerning population characteristics using information gathered from the sample It is assumed that the sample is representative of the population A further assumption is that the sample has been drawn as a simple random sample from an infinite population Reminder: What is inference?

4 4 PopulationSample Mean Variance 2 s2s2 Std. deviation s Population characteristics (parameters) are denoted by greek letters, sample values by latin letters Sample characteristics are measurable and form estimates of the population values. Estimation

5 5 What is the mean number of persons per household in Mukono district? Data from 80 households surveyed in this district gave a mean household size of 5.6 with a standard deviation 3.30. Hence our best estimate of the mean household size in Mukono district is therefore 5.6. What results are likely if we sampled again with a different set of households? Example of statistical inference

6 6 Example using Stata Open Stata file UNHS_hh&poverty.dta Numeric code is 109 for Mukono

7 7 Use summarize dialogue Type db summarize or use menu Statistics Summaries, tables Summaries Summary Statistics Variable hhsize Then use by/if/in tab dist ==109 is condition

8 8 Results Summaries for Mukono only Summaries for whole sample

9 9 Suppose 10 University students were given a standard meal and the time taken to consume the meal was recorded for each. Suppose the 10 values gave: mean = 11.24, with 0.864 Lets assume this exercise was repeated 50 times with different samples of students A histogram of the resulting 500 obs. appears below, followed by a histogram of the 50 means from each sample The distribution of means

10 10 The data appear to follow a normal distribution Histogram of raw data

11 11 The dist n of the sample means is called its Sampling Distribution Notice that the variability of the above dist n is smaller than the variability of the raw data Histogram of 50 sample means

12 12 The estimate of the mean household size in Mukono district was 5.6. Is this sufficient for reporting purposes, given that this answer is based on one particular sample? What we have is an estimate based on a sample of size 80. But how good is this estimate? We need a measure of the precision, i.e. variability, of this estimate… Back to estimation…

13 13 The accuracy of the sample mean as an estimate of depends on: (i)the sample size ( n ) since the more data we collect, the more we know about the population, and the (ii) inherent variability in the data 2 These two quantities must enter the measure of precision of any estimate of a population parameter. We aim for high precision, i.e. low standard error! Sampling Variability

14 14 Precision of as estimate of is given by: the standard error of the mean. Also written as s.e.m., or sometimes s.e. It is estimated using the sample data: s/ n For example on household size, s.e.=3.298/ 80 = 3.298/8.944 = 0.369 Standard error of the mean

15 15 Instead of using a point estimate, it is usually more informative to summarise using an interval which is likely (i.e. with 95% confidence) to contain. This is called an interval estimate or a Confidence Interval (C.I.) For example, we could report that the mean household size of HHs in Mukono district is 5.6 with 95% confidence interval (4.87, 6.33), i.e. there is a 95% chance that the interval (4.87,6.33) includes the true value. Confidence Interval for

16 16 Analysis using Stata Type db ci or use menu Use the by/if/in tab as before

17 17 Results For whole sample Just for Mukono

18 18 The 95% confidence limits for (lower and upper) are calculated as: and where t n-1 is the 5% level for the t -distribution with ( n -1) degrees of freedom. Statistical tables and statistical software give t -values. Finding the Confidence Interval

19 19 P 10 5 2 = 16.3112.731.8 22.924.306.96 32.353.184.54 42.132.783.75 52.022.573.36 61.942.453.14 71.892.363.00 81.862.312.90 91.832.262.82 101.812.232.76 201.722.092.53 301.702.042.46 401.682.022.42 601.672.002.39 1.641.962.33 t-values for finding 95% C.I.

20 20 If we sampled repeatedly and found a 95% C.I. each time, only 95% of them would include the true, i.e. there is a 95% chance that a single interval would include. Correct interpretation of C.I.s

21 21 For rural households ( n =40) in Mukono, we find mean=6.43, for the number of persons per household. Hence a 95% confidence interval for the true mean number of persons per household: 6.43 t 39 ( s/ n ) = 6.43 2.02(3.54/ 40) = 6.43 1.13 = (5.30, 7.56) Can you interpret this interval? Write down your answer. We will then discuss. An example (persons per HH)

22 22 Analysis in Stata Press Page Up to retrieve the last command Then add & rurban == 0 to the condition Or use the menus and change the dialogue

23 23 The above computation of a confidence interval assumes that the data have a normal distribution. More exactly, it requires the sampling distribution of the mean to have a normal distribution. What happens if data are not normal? Not a serious problem if sample size is large because of the Central Limit Theorem, i.e. that the sampling distribution of the mean has a normal distribution, for large sample sizes. Underlying assumptions

24 24 So even when data are not normal, the formula for a 95% confidence interval will give an interval whose confidence is still high - approximately 95%. It is better to attach some measure of uncertainty than worry about the exact confidence level. Assumptions - continued

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