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    Statistics Probability The Central Limit Theorem

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    troyguimary9
    The central limit theorem states that as sample size increases, the distribution of sample means approaches a normal distribution, regardless of the population's actual distribution. Key aspects are that the mean of the sampling distribution equals the population mean, and its variance equals the population variance divided by the sample size. The central limit theorem is useful in estimating characteristics of populations from samples.

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    Statistics Probability The Central Limit Theorem

    Uploaded by

    troyguimary9
    72 views11 pages
    The central limit theorem states that as sample size increases, the distribution of sample means approaches a normal distribution, regardless of the population's actual distribution. Key aspects are that the mean of the sampling distribution equals the population mean, and its variance equals the population variance divided by the sample size. The central limit theorem is useful in estimating characteristics of populations from samples.

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    Statistics Probability the Central Limit Theorem

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    The central limit theorem states that as sample size increases, the distribution of sample means approaches a normal distribution, regardless of the population's actual distribution. Key aspects are that the mean of the sampling distribution equals the population mean, and its variance equals the population variance divided by the sample size. The central limit theorem is useful in estimating characteristics of populations from samples.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    72 views11 pages

    Statistics Probability The Central Limit Theorem

    Uploaded by

    troyguimary9
    The central limit theorem states that as sample size increases, the distribution of sample means approaches a normal distribution, regardless of the population's actual distribution. Key aspects are that the mean of the sampling distribution equals the population mean, and its variance equals the population variance divided by the sample size. The central limit theorem is useful in estimating characteristics of populations from samples.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 11

    Central Limit Theorem was

    summarized as follows:
    1. As the sample size n increases,
    the sampling distribution of the means
    approaches a normal distribution.
    2. The mean of the sampling
    distribution of means is equal to the
    mean of the population.
    3. The variance of the sampling
    distribution of means is equal to the
    variance of the population divided by the
    sample size.
    4. The standard deviation of the
    sampling distribution of means is equal
    to the standard deviation of the
    population divided by the square root of
    the sample size.
    KEY TAKEAWAYS:
    The central limit theorem (CLT) states
    that the distribution of sample means
    approximates a normal distribution as the
    sample size gets larger, regardless of the
    population's distribution.
    Sample sizes equal to or greater than
    30 are often considered sufficient for the
    CLT to hold.
    A key aspect of CLT is that the average of the
    sample means and standard deviations will
    equal the population mean and standard
    deviation.
    A sufficiently large sample size can predict
    the characteristics of a population more
    accurately.
    CLT is useful in finance when analyzing a
    large collection of securities to estimate
    portfolio distributions and traits for returns,
    risk, and correlation.
    As a general rule, sample sizes of around 30-
    50 are deemed sufficient for the CLT to hold,
    meaning that the distribution of the sample
    means is fairly normally distributed.
    Therefore, the more samples one takes, the
    more the graphed results take the shape of a
    normal distribution. Note, however, that the
    central limit theorem will still be
    approximated in many cases for much
    smaller sample sizes, such as n = 8 or n = 5.
    The central limit theorem is often used in
    conjunction with the law of large numbers,
    which states that the average of the sample
    means and standard deviations will come
    closer to equaling the population mean and
    standard deviation as the sample size
    grows, which is extremely useful in
    accurately predicting the characteristics of
    populations.
    Key Components of the Central Limit Theorem
    The central limit theorem is comprised of
    several key characteristics. These
    characteristics largely revolve around
    samples, sample sizes, and the population of
    data.

    Sampling is successive. This means some


    sample units are common with sample units
    selected on previous occasions.
    Sampling is random. All samples
    must be selected at random so that they
    have the same statistical possibility of
    being selected.
    Samples should be independent. The
    selections or results from one sample
    should have no bearing on future
    samples or other sample results.
    Samples should be limited. It's often
    cited that a sample should be no more
    than 10% of a population if sampling is
    done without replacement. In general,
    larger population sizes warrant the use
    of larger sample sizes.
    Sample size is increasing. The
    central limit theorem is relevant as
    more samples are selected.

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