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Quant Analysis

The document discusses the importance of sampling, outlining reasons for sampling and various methods such as simple random, systematic, stratified, and cluster sampling. It also explains concepts like sampling error, the sampling distribution of the sample mean, and the central limit theorem, emphasizing how sample means approximate the population mean as sample size increases. Additionally, it includes class exercises to apply these concepts in practical scenarios.

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0% found this document useful (0 votes)
2 views12 pages

Quant Analysis

The document discusses the importance of sampling, outlining reasons for sampling and various methods such as simple random, systematic, stratified, and cluster sampling. It also explains concepts like sampling error, the sampling distribution of the sample mean, and the central limit theorem, emphasizing how sample means approximate the population mean as sample size increases. Additionally, it includes class exercises to apply these concepts in practical scenarios.

Uploaded by

abharadwaj2209
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Sampling

Reasons to Sample
 Contacting the whole population would be time
consuming.
 Studying all the items in a population may be too costly.
 Checking all items in a population may be physically
impossible.
 Some tests conducted during sampling are destructive.
 Sample results are adequate.
Sampling Methods
 Simple random sampling — each item or person in the
sample has an equal chance of being selected.
 Systematic random sampling — a random starting point
is selected and then every nth member of the population
is selected.
 Stratified random sampling — divides a population into
subgroups, called strata, and a sample is randomly
selected from each subgroup or stratum.
 Cluster sampling — divides a population into clusters
using geographic or natural groupings, then clusters are
randomly selected and a sample is collected by randomly
selecting from each cluster.
Sampling Error
 The difference between a sample statistic and its
corresponding population parameter is called a sampling
error.
 Why do sample means in a given population vary from
sample to sample?
 Is there a difference between the sample mean and the
population mean? Why? What is the difference called?
 Is there a difference between the sample variance and
the population variance? Why? What is the difference
called?
Class Exercise 1
 Management Systems, Inc. has 10 employees (considered the
population). The hourly earnings of each employee are given
below.
Employee Hourly Earnings Employee Hourly Earnings
Joshua PHP250 Daniel PHP250
Ruth PHP300 Joel PHP250
Samuel PHP300 Jonah PHP250
Ezra PHP300 Micah PHP300
Esther PHP350 Job PHP400

 Select five random samples with five employees each.


 Calculate the mean of each sample and compare each sample
mean to the population mean. What is the sampling error of
each sample mean?
Sampling Distribution of the
Sample Mean
 The probability distribution of all possible sample means
of a given sample size is called the sampling distribution of
the sample mean.
 The mean of the sample means is exactly equal to the
population mean.
 The dispersion of the sampling distribution of sample
means is narrower than the population distribution.
 The sampling distribution of sample means tends to
become bell-shaped and to approximate the normal
probability distribution.
Class Exercise 2
 Hansel and Gretel operate the Enchanted Forest Inn. There are eight
rooms available for rent. The number of rooms rented each day in June
2008 is shown below.
Date Rooms Date Rooms Date Rooms Date Rooms Date Rooms
Rented Rented Rented Rented Rented
June 1 2 June 7 1 June 13 3 June 19 7 June 25 4
June 2 3 June 8 2 June 14 4 June 20 8 June 26 3
June 3 4 June 9 3 June 15 5 June 21 8 June 27 3
June 4 4 June 10 4 June 16 6 June 22 7 June 28 2
June 5 5 June 11 5 June 17 7 June 23 6 June 29 3
June 6 4 June 12 4 June 18 6 June 24 5 June 30 4

 What is the population mean for June?


 What is the sampling distribution of the sample mean for samples of size 5?
 What is the mean of the sampling distribution? What observation can be
made about the population and the sampling distribution?
Central Limit Theorem
 If all samples of a particular size are selected from any
population, the sampling distribution of the sample mean
is approximately a normal distribution and the
approximation improves as the sample size increases.
 The central limit theorem (CLT) indicates that the sampling
distribution of the sample mean will converge to the normal
probability distribution regardless of the shape of the
population distribution.
 As the sample size increases, the convergence to the normal
probability distribution also improves.
 The sampling distribution of the sample mean moves from a
skewed distribution to a distribution that approximates the
normal probability distribution.
Standard Error of the Mean
 
x  where is referred to as the standard error of the mean
n sample
n and n is the number of observations of each

 The standard error of the mean is also called the standard


deviation of the sampling distribution of the sample mean.
 The mean of the distribution of sample means will be
exactly equal to the population mean if we are able to
select all possible samples of the same size from a given
population, i.e., .

 There is less dispersion in thex sampling distribution of the
sample mean than in the population ().
 n 
Class Exercise 3
 Refer to Hansel and Gretel’s Enchanted Forest Inn data.
Choose 10 samples with five days each.
 Compute the mean of each sample.
 Compute the mean of your 10 samples.
 How close is the mean of your 10 samples to the
population mean?
 What is the standard error of the mean of your 10
samples?
 When will the mean of the samples equal the
population mean?
Using the Sampling Distribution of the
Sample Mean
 The sampling distribution of the sample mean follows the
normal distribution when the samples are taken from
populations known to follow the normal distribution.
 When the shape of the population distribution is not known
or not normal but the sample size is at least 30 observations,
the CLT argues that the sampling distribution of the sample
mean follows a normal distribution.
 The formula for finding a z value for X is .X 
z

 The formula for finding a z value for is .
X 
This is the z value for a sample when theX z
population variance is known.  n
Class Exercise 4
 Liquid Soap, Ltd. wants to ensure that its laundry detergent
actually contains 50 fluid ounces (fl. oz.) as indicated in the
label. Historical data from the filling process indicate the mean
amount per container is 50 fl. oz. and the standard deviation is
one fl. oz. The quality assurance (QA) supervisor in her 11 AM
check of 30 containers finds the mean amount per container is
49.85 fluid ounces. Should the supervisor shut down the filling
process or is the sampling error reasonable?
 The next day, another QA supervisor checks 40 containers
and finds the mean amount is 50.35 fl. oz. Should the
supervisor shut down the filling process because the company
might be giving away too much liquid soap or is the sampling
error reasonable?

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