2-25-09 - Economic Statistics Class Notes 2/25/09 Q: How do...

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Economic Statistics – Class Notes – 2/25/09 Q: How do we know when to use Z vs. t vs. chi-square vs. F Short answer – to use t, Chisquare, or F, the parent population must be distributed normally. Chisquare is either a square of standard normal variable t, chisquare, or F Central limit theorem DOES NOT APPLY Parent population distributed normally Population standard deviation known? Is “n” large? Use YES YES YES OR NO Z distribution YES NO YES OR NO T distribution NO YES YES Z the sampling distribution of sample means approaches N with large “n” through the Central Limit Theorem NO NO YES Z for two reasons: 1. The sampling distribution of sample means approaches the NORMAL DISTRIBUTI ON via central limit theorem 2. As n approaches infinite, the sample standard deviation (s) approaches the pop. Std. dev. (o) via consistency. NO YES OR NO NO Test NOT valid. We assume that the parent population is normally distributed
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END OF EXAM 1 MATERIAL E. HYPOTHESIS TESTING
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2-25-09 - Economic Statistics Class Notes 2/25/09 Q: How do...

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