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MATH& 146

Lesson 21
Section 2.8
Confidence Intervals

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Confidence Intervals
Recall that a point estimate is a statistic
calculated from a sample that is used to estimate a
population parameter.
For example, the sample mean, x , can be used to
estimate the population mean, .
Likewise, the sample proportion, p, can be used to
estimate the population proportion, p.

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Confidence Intervals
A point estimate provides a single plausible value
for a parameter.
Point estimates are the best guess, based on the
sample, but are rarely perfect; usually there is
some error in the estimate.
In addition to supplying a point estimate of a
parameter, a next logical step would be to provide
a plausible range of values for the parameter.

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Confidence Intervals
A plausible range of values for the population
parameter is called a confidence interval.
Using only a point estimate is like fishing in a
murky lake with a spear, and using a confidence
interval is like fishing with a net. We can throw a
spear where we saw a fish, but we will probably
miss. On the other hand, if we toss a net in that
area, we have a good chance of catching the fish.

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Confidence Intervals
If we report a point estimate, we probably will not
hit the exact population parameter.
On the other hand, if we report a range of plausible
values a confidence interval we have a good
shot at capturing the parameter.

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Example 1
If we want to be very certain we capture the
population parameter, should we use a wider
interval or a smaller interval?

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Confidence Intervals
The point estimate is the most plausible value for
our parameter of interest, so it makes sense to
build the confidence interval around the point
estimate.
The margin of error is a measure of the
uncertainty associated with the point estimate, It is
found by multiplying the standard error with the
confidence coefficient.

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Example 2
Compute the area between 1.96 and 1.96 for a
normal distribution with mean 0 and standard
deviation 1.

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95% Confidence Intervals
As you saw with the last example, approximately
95% of all values in a normal distribution will be
within 1.96 standard deviations from the mean.

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Example 3
Suppose X ~ N( = 100, = 16). Approximately
95% of all values will be between which two
numbers?

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95% Confidence Intervals
When the sampling distribution of a point estimate
can reasonably be modeled as normal, the point
estimate we observe will be within 1.96 standard
errors of the true value of interest about 95% of the
time. Thus, a 95% confidence interval for such a
point estimate can be constructed:
point estimate 1.96 SE
We can be 95% confident this interval captures
the true value.

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Conditions
The normal approximation is crucial to the precision of
confidence intervals. To ensure this, we need to check
the following conditions.
The sample observations are independent.
The sample size is large enough.
The distribution of sample observations is not too
strongly skewed. (However, we can relax this
condition as the sample size increases.)

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Independence
Verifying independence is often the most difficult of the
conditions to check, and the way to check for
independence varies from one situation to another.
However, we can provide simple rules for the most
common scenarios:
Independence is guaranteed when we take random
samples from less than 10% of the population.
It can also be guaranteed if we randomly divide
individuals into treatment and control groups.

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Example 4
The point estimate from the opportunity cost study was
that 20% fewer students would buy a DVD if they were
reminded that money not spent now could be spent
later on something else. The point estimate from this
study can reasonably be modeled with a normal
distribution, and a proper standard error for this point
estimate is SE = 0.078.
Construct a 95% confidence interval. Assume the
conditions for the normal approximation have been
met.

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Stent Study
Section 1.1 of our textbook describes an
experiment that examined whether implanting a
stent in the brain of a patient at risk for a stroke
helps reduce the risk of a stroke. The results from
the first 30 days of this study, which included 451
patients, are summarized below.

stroke no event Total


treatment 33 191 224
control 13 214 227
Total 46 405 451
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Stent Study
Surprisingly, the point estimate suggests that
patients who received stents may have a higher
risk of stroke:
33 13
p trmt p ctrl 0.090
224 227

stroke no event Total


treatment 33 191 224
control 13 214 227
Total 46 405 451
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Example 5
Consider the stent study and results. The conditions
necessary to ensure the point estimate p trmt p ctrl
0.090 may be assumed to come from a normal
distribution, and the estimate's standard error is SE =
0.028. Construct a 95% confidence interval for the
change in 30-day stroke rates from usage of the stent.

stroke no event Total


treatment 33 191 224
control 13 214 227
Total 46 405 451
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95% Confidence Intervals
As with hypothesis tests, confidence intervals are
imperfect. About 1-in-20 properly constructed 95%
confidence intervals will fail to capture the parameter
of interest.

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0.045 p = 0.100 0.155
95% Confidence Intervals
The figure below shows 25 confidence intervals for a
proportion that were constructed from simulations
where the true proportion was p = 0.100. However, 1
of these 25 confidence intervals happened not to
include the true value.

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0.045 p = 0.100 0.155
Example 6
In the figure below, one interval does not contain the
true proportion, p = 0.100. Does this imply there was a
problem with the simulations run?

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0.045 p = 0.100 0.155
Why not 100% Confidence?
The more confident we want to be, the larger the
margin of error must be. To be 100%, however,
usually involves making a statement that is pretty
useless.
For example, I am 100% confident that the average
student will score between 0 and 100 percent on the
final. Completely correct, but not useful.
For another example, see
http://garfield.com/comic/1999-03-12.

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Why not 1% Confidence?
On the other hand, a confidence interval of, say,
0.00994 to 0.01006, which are the results from a
simulation with 1% confidence, is useful, but not
very likely.
The tension between certainty and precision is
always there. Fortunately, in most cases we can
be both sufficiently certain and sufficiently precise
to make useful statements.

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Confidence Levels
The choice of confidence level is somewhat
arbitrary (the data can't do it for you), but the most
commonly chosen confidence levels are 90%,
95%, and 99%.
Although any percentage can be used, you should
be able to justify your choice. In practice, using
something like 92.9% or 97.2% is likely to make
people think you're up to something.

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Changing Confidence Levels
Suppose we want to consider confidence intervals
where the confidence level is somewhat higher
than 95%: perhaps we would like a confidence
level of 99%.
Think back to the analogy about trying to catch a
fish: if we want to be more sure that we will catch
the fish, we should use a wider net.

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Confidence Levels
In general, if the point estimate follows the normal
model with standard error SE, then a confidence
interval for the population parameter is
point estimate z*SE
where z* corresponds to the confidence level
selected.
In a confidence interval, z*SE is called the margin
of error.

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Confidence Levels
To make your life easier, you should just
memorize, or have it written somewhere
prominent, the three most common confidence
coefficients:

Confidence Level z*
90% 1.64
95% 1.96
99% 2.58
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Example 7
Create a 99% confidence interval for the impact of
the stent on the risk of stroke using the data below.
The point estimate is 0.090, and the standard error
is SE = 0.028. It has been verified for you that the
point estimate can reasonably be modeled by a
normal distribution.

stroke no event Total


treatment 33 191 224
control 13 214 227
Total 46 405 451
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Polling

Confidence Level

Margin of Error

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Interpreting Confidence
Intervals
A careful eye might have observed the somewhat
awkward language used to describe confidence
intervals. Correct interpretation:

We are XX% confident that the population


parameter is between...

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