Confidence interval

A 95% confidence interval for the difference between the means is,

(– ) ± 1.96´ SE (– )

= 7.4 ± 1.96´1.83 = (3.8, 11.0)

Two equivalent statements:

1. The 95% confidence interval for D doesn’t include 0;

2. The hypothesis that D = 0 is rejected at the 5% level.

What comes next…

· The mechanics of estimation, hypothesis testing, and confidence intervals should be familiar

· These concepts extend directly to regression and its variants

· Before turning to regression, however, we will review some of the underlying theory of estimation, hypothesis testing, and confidence intervals:

· why do these procedures work, and why use these rather than others?

· So we will review the intellectual foundations of statistics and econometrics

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