Lecture 2 - Distributions
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Diana SankarLecture 2 - Distributions
Uploaded by
Diana SankarLecture 2:
Distributions
Slides by Dr Anthony Birchwood
Revised by Soleil Frederick
Learning Outcomes
• Discuss the Normal Distribution
• Discuss the Chi Square Distribution
• Discuss the T-Distribution
• Discuss the F-Distribution
• Discuss the Regression Model
• Discuss the types of Data
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Distributions
• Normal Distribution
• Chi-square
• T distribution
• F distribution
3
Normal Distribution
• For any population distribution, once the
number of samples drawn on a population are
sufficiently large, then
– the mean and variance of the sample would be
equal to that of the population regardless of the
distribution.
• This is known as the Central Limit Theorem.
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Normal Distribution
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Definition of Normal Distribution
• Normal distribution density function is
defined as
• Standard Normal is one that has a mean of
zero and a variance of one. That is
• For Standard Normal: Mean=Median=Mode.
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Non Standard Normal
• Negatively Skewed
• Mean < Median < Mode.
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Non Standard Normal
• Positively Skewed
Mean > Median > Mode
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Attributes of a normal distribution
• Centre and dispersion is given by
• Standard normal is symmetric around the mean.
– Where is the standardized normal random variable is
one that has a probability density function (cdf).
– Random is synonyms with chance or stochastic
probability.
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Chi-square
• Chi square is a non-parametric statistical
technique to investigate whether the
distribution of categorical variables differ.
• Can be used to test the hypothesis whether
the mean between 2 groups or populations
differ.
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Estimating Chi-square
• Chi-square random variables are obtained
when standard normal random variables are
squared.
• If , denote random variables, then
• This means that the random variables has a
chi-square distribution with degrees of
freedom.
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Shape of the Chi square curve
• The degrees of freedom parameter indicates
the number of independent random variables
that are squared and summed to form
• The value of determines the entire shape of
the chi-square distribution and its mean and
variance.
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Tail of Chi-square curve
• As becomes larger, the distribution has a long
tail and is skewed to the right .
• When it is sufficiently large, the distribution
converges to a normal distribution.
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Chi Square
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T-test
• The t-test is used to compare the means of
two groups to test the null hypothesis: that is
whether the means are equal between
groups.
• If z and V and and are independent, then .
– where is the sample standard deviation.
– is the sample size.
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F-Distribution
• F distribution is formed by the ratio of two
independent chi-square random variables,
divided by their degrees of freedom.
• .
• F test:
–, 0
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What is a Regression Model
• In very general terms, regression is concerned
with describing and evaluating the
relationship between a given variable and one
or more other variables.
• More specifically, regression is an attempt to
explain movements in a variable by reference
to movements in one or more other variables.
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Regression Model
• Regression analysis is used to:
– Predict the value of a dependent variable based on
the value of at least one independent variable
– Explain the impact of changes in an independent
variable on the dependent variable
Dependent variable: the variable we wish to
explain
Independent variable: the variable used to explain
the dependent variable
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Simple Linear Regression
Population Slope Independent Random Error term,
Population
y intercept Coefficient Variable or residual
Dependent Variable
Linear component Random Error
component
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Types of Data
• Time Series Data
– Quantitative data
– Qualitative Data
• Cross Sectional Data
• Panel Data
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Continuous and Discrete Data
• Continuous Data – can take on any value
• Discrete Data –are often defined to be count
numbers.
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Steps involved in Forming An Econometric
Model
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What About Steps 4, 5 and 6?
• To be continued…
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