TA9a - ECO2121 Methods of Economic Statistics TA9a 18 March...

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ECO2121: Methods of Economic Statistics TA9a 18 March 2009 Excel Functions for Distributions 1. Normal Distribution N ( μ , σ 2 ) We know z 0.05/2 = 1.96, now we want to know the two following: (a) if we fix an α , what is the corresponding z α ; and (b) if we fix a z α , says 1.8, what is the corresponding α ? (a) is answered by the Excel Function NORMINV(probability, mean, standard_dev), which gives NORMINV(.05, 0, 1) = -1.64485 for one-tail (i.e. .05 probability is on the left tail) and NORMINV(.05/2, 0, 1) = -1.96 for two-tail. In fact, for N (0, 1), the functions NORMSINV(probability) can do the same job. (b) is answered by the Excel Function NORMSDIST(z), which is the cumulative distribution function of z , i.e. Pr{ Z < z }. For example, NORMSDIST(1.96) = .975, NORMSDIST(-1.96) = .024998; and NORMSDIST(1.645) = .95. Hence, to compute the p -value for a test statistic z , we just need to compute 1 NORMSDIST( z ) if it is a one-sided test or 2 × {1 NORMSDIST( z )} if it is a two-sided
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TA9a - ECO2121 Methods of Economic Statistics TA9a 18 March...

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