Notes - Econ 2370 - Statistics and Probability

1 Moment Statistics
Advantages
Mathematically interrelated and related to other moments.
All have the same assumptions.
They provide the only measures of skewness and kurtosis.
They provide suÆcient information to reconstruct a frequency distribution function.
Assumption Interval or ratio data, univariate system
General Moment Equation

k =
1 X
N
k
i
N i=1

= any variable having its origin at some point .

 = real or arbitrary origin (operationally dened)
k = the kth moment about .
Moments about the origin  = 0, Xi = raw score
First Moment (M1 ) - Mean = X

M1 =
1 X
N
Xi =
1 X
N
(freq  X )
N N
i=1 i=1

Second Moment (M2 )

M2 =
1 XX
N
2
XN
= N1 (freq  X 2 )
i
N i=1 i=1

Third Moment (M3 )

M3 =
1 X
N
Xi =
3 1 X
N
( freq  X 3 )
N N
i=1 i=1

Fourth Moment (M4 )

M4 =
1 X
N
Xi =
4 1 X
N
( freq  X 4 )
N N
i=1 i=1

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Notes - Econ 2370 - Statistics and Probability
 (x1 = Xi
Moments about the mean  = X, X ) = raw score
First Moment (m1 )

m1 =
1 X
N
xi = 0
N i=1

Second Moment (m2 ) - Variance

m2 =
1 X
N
x2i = M2 M12
N i=1

Standard Deviation (s) = pm2 .

Third Moment (m3 )

m3 =
1 X
N
x3i = M3 3M1 M2 + 2M13
N i=1

For a symmetrical distribution, m3 =0. This function(m3) is related to skewness,

but it is in uenced by the size of the unit of measure.
Fourth Moment (m4 )

m4 =
1 X
N
x4i = M4 4M1 M3 + 6M12 M2 3M14
N i=1

m4 is directly related to kurtosis, but it in uenced by the size of the metric unit.

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Notes - Econ 2370 - Statistics and Probability
 (z1 = xsi ) = standardized score
Standardized Moments  = X,
First Moment (a1 )

a1 =
1 X
N
zi = 0
N i=1

Second Moment (a2 )

a2 =
1 X
N
zi2 = 1
N i=1

Third Moment (a3 ) - Skewness

a3 =
1 Xz
N
3
= M3 p3M1 M2 +2 23M1 = ms33
3
i
N i=1 ( M2 M1 )

Fourth Moment (a4 ) - Kurtosis = (a4 -3.0)

a4 =
1 Xz
N
4
= M4 4M1(M 3 + 6M1 M2
2
3M14 = m4
N i=1
i
M2 M12 )2 V ariance2

Interpretation of Moment Statistics

Mean (M1 ) - 1st moment about the origin - central tendency measure.
Variance (m2 ) - 2nd moment about the mean - dispersion measure.
Skewness (a3) - 3rd standardize moment - skewness measure.
a3 = 0 ! symmetrical
a3 > 0 ! positively skewed
a3 < 0 ! negatively skewed
for a3 between  0.2, the distribution can be assumed to be normal with respect to
skewness.
Kurtosis (a4 -3.0) - (4th standardized moment - 3) - kurtosis measure.
a4 3 = 0 ! same peakedness as normal curve.
a4 3 > 0 ! more peakedness than normal curve.

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Notes - Econ 2370 - Statistics and Probability

a4 3 < 0 ! attter than normal curve.

for a4 3 between  0.5, the curve can be considered normal with respect to kurtosis.
Example - # of years attending University of Houston
Y ears Students
(X ) (F ) F  X F  X 2 F  X 3 F  X 4
1 5 5 5 5 5
2 4 8 16 32 64
3 3 9 27 81 243
4 7 28 112 448 1792
5 1 5 25 125 625
6 1 6 36 216 1296
N=21
P X = 61
P X = 221 M1 = 2.90476 m1 = 0.00000 a1 = 0.00000
P X = 907
2
M2 = 10.52381 m2 = 2.08617 a2 = 1.00000
P X = 4025
3
4
M3
M4
= 43.19048
= 191.66667
m3 = 0.50167
m4 = 9.02988
a3 = 0.16649
a4 = 2.07483
Mean = M1 = 2.90476
Variance = m2 = 2.08617
Standard Deviation = pm2 = 1.4443572
Skewness = a3 = 0.16649 ! assumed normal
Kurtosis = (a4 3) = -0.92517 ! atter than a normal distribution curve.

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Notes - Econ 2370 - Statistics and Probability

2 Single Sample Tests

2.1 Single sample test of the mean (
^) where  is known
Make Assumption
Level of measurement - interval
Model - random sampling, population nornally distributed,  = (some known value)
HO:  = (some number)
Obtain a Sampling Distribution
Z distribution
 = (some number)
X = pN
Choose a Signicance Level and Critical Region
 = 0.05, 0.01 or 0.001
One or two tail test
H1:  6= (some number)
Compute a Test Statistics
X 
Z=
X
Make a decision
Formula for computing the condence interval
C ((X Z 2 X )    (X + Z 2 X )) = 1 

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