lecture 2 statistics review-JKR-p.pptx

# lecture 2 statistics review-JKR-p.pptx - Business...

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Review of statistics: Fundamental point of statistics Distribution of the sample mean Confidence intervals and hypothesis testing Outline for Today Business Econometrics
Question: How would you learn the average HS GPA of all IU freshmen in 2017? Fundamental Point in Statistics Business Econometrics Could ask everyone… Other problems… We can learn about a population characteristic by looking only at the characteristic in a random sample

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Population = entire set of potential observations Data sample = subset of the population that is collected and observed Look at random samples of 10 students How would you describe each dataset? How are they alike? Different? Estimating average HS GPA at IU Business Econometrics High school GPA DS1 3.78 3.76 3.76 3.75 3.78 3.71 3.70 3.71 3.76 3.77 DS2 3.23 3.82 3.97 3.85 3.46 3.92 3.81 4.00 3.39 3.92
How to use the sample to predict population GPA? Problem: we might have sampled a bunch of low/high GPA students by chance How likely is that, according to each data set? Hint: how big is the difference between “high” and “low” GPA in each of the data sets? Mean and standard deviation Business Econometrics Mean GPA SD GPA 1 3.75 0.03 2 3.74 0.26

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A Simulation Exercise Business Econometrics Goal: Understand the Central Limit Theorem using an experimental approach Please access: http:// onlinestatbook.com/stat_sim/sampling_dist/index.html 1. Read the instructions. Press “Begin” 2. Customize your preferred probability distribution by clicking your mouse wit the RH button and hovering over the graph. 3. Construct samples for the sample mean with sizes N=5 and N=25. Click on “animated”. Then, click on 5. What do you notice? 4. Next, click on 10,000, then 100,000. Which distribution is closer to a normal distribution?
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