Unformatted text preview: ¸ 2 ) = Î¸ Ë†
Ë† Î¸1 is said to be more efficient than Î¸ 2 if: Ë†
Ë†
Var (Î¸1 ) < Var (Î¸ 2 ) The relative efficiency of one estimator with respect to another is the variance ratio: Ë†
Var(Î¸ 2 ) Ë†
Var(Î¸1 ) Ë†
If Î¸ is an unbiased estimator of Î¸ , and no other unbiased Ë†
Ë†
estimator has smaller variance than Î¸ , then Î¸ is said to be the most efficient or minimum variance unbiased estimator of Î¸ . 5 Chapter 8 Example Continued: For the random sample X 1 , X 2 , X 3 , introduced above, assume the population variance is Ïƒ and also assume independence. 2 That is, Var(X 1 ) = Var(X 2 ) = Var(X 3 ) = Ïƒ 2 and Cov(X 1 , X 2 ) = Cov(X 1 , X 3 ) = Cov(X 2 , X 3 ) = 0 Two unbiased estimators for the population mean were proposed as: 1
X = (X 1 + X 2 + X 3 ) 3 and 1
X W = (X 1 + 4 X 2 + X 3 ) 6 The variance of the first estimator is: 1
Var( X ) = [Var(X 1 ) + Var(X 2 ) + Var(X 3 )]
9
1
= (3 Ïƒ 2 ) = Ïƒ 3
9
2 The variance of the second estimator is: Var( X W ) = 6 1
[Var(X 1 ) + 16 Var(X 2 ) + Var(X 3 )]
36 2
1
= (18 Ïƒ 2 ) = Ïƒ 2
36 Chapter 8 It can be seen that: Var ( X ) < Var ( X W ) Therefore, X is more efficient than X W . The relative efficiency is: 2
Var( X W ) Ïƒ 2 3
= 2 = = 1.5 Var( X )
Ïƒ3 2 Note: A reporting style for the measure of relative efficiency is to place the higher variance in the numerator. 7 Chapter 8 As a variation, suppose that the random sample X 1 , X 2 , X 3 have probability distributions with identical population mean Î¼ but unequal population variances. Assume: Var(X 1 ) = 4 Ïƒ 2 Var(X 2 ) = Ïƒ 2 Var(X 3 ) = 4 Ïƒ 2 and The revised variances for the two competing estimators of the population mean are: 1
Var( X ) = [Var(X 1 ) + Var(X 2 ) + Var(X 3 )]
9
1 = (4 Ïƒ 2 + Ïƒ 2 + 4 Ïƒ 2 )
9
= Ïƒ2
1
[Var(X 1 ) + 16 Var(X 2 ) + Var(X 3 )]
36
1
= (4 Ïƒ 2 + 16 Ïƒ 2 + 4 Ïƒ 2 ) 36 Var( X W ) = = 24 2
Ïƒ
36 The results now show: Var ( X W ) < Var ( X ) When the random sample have distributions with population W variances unequal then the weighted average X is more efficient than the sample mean X as an estimator of the population mean. 8 Chapter 8 Chapter 8.2 Interval Estimation Let the random sample X 1 , X 2 , . . . , X n be a set of independent and identically distributed random variables with mean Î¼ and variance Ïƒ . 2 Consider Î¸ as a population parameter of interest. The true value of this parameter is unknown. Ë†
A point estimator of Î¸ can be proposed as: Î¸ = f( X 1 , X 2 , K , X n ) It may also be informative to find random variables Ë†
Ë†
Î¸ low and Î¸ high such that: Ë†
Ë†
P(Î¸ low < Î¸ < Î¸ high ) = 0.9 Ë†
Ë†
[Î¸ low , Î¸ high ] is called a 90% confidence interval estimator for Î¸ . Ë†
Ë†
In general, find ran...
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This note was uploaded on 02/06/2014 for the course ECON ECON 325 taught by Professor Whistler during the Spring '10 term at UBC.
 Spring '10
 WHISTLER

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