The Pivotal Quantity
The Pivotal Quantity
parameters in a population. A pivotal quantity is a function of the sample data and the unknown
parameter that has a known distribution that does not depend on the parameter itself. This approach is
commonly used because it provides a systematic way to derive confidence intervals, particularly when
the sampling distribution of the estimator is known or can be approximated.
- A pivotal quantity \( Q \) is a function of the sample data \( X = (X_1, X_2, \ldots, X_n) \) and the
unknown parameter \( \theta \) such that the distribution of \( Q \) does not depend on \( \theta \). That
is, the distribution of \( Q \) is known and fixed, regardless of the parameter's value.
- For example, if \( X \sim N(\mu, \sigma^2) \), then the quantity \( \frac{\bar{X} - \mu}{\sigma /
\sqrt{n}} \) has a standard normal distribution, and thus it is a pivotal quantity for \( \mu \).
- To construct a confidence interval for an unknown parameter \( \theta \), identify a pivotal quantity \(
Q(X, \theta) \) with a known distribution.
- For a desired confidence level \( (1 - \alpha) \), find constants \( a \) and \( b \) such that \( P(a \leq
Q(X, \theta) \leq b) = 1 - \alpha \).
- Rearrange this inequality to isolate \( \theta \) and form an interval based on the observed data
values.
### Steps for Constructing a Confidence Interval with the Pivotal Quantity Method
- Find a pivotal quantity involving both the sample statistic (from the observed data) and the parameter
\( \theta \) you want to estimate. For example, for a normally distributed population, the standardized
sample mean \( \frac{\bar{X} - \mu}{\sigma / \sqrt{n}} \) is a pivotal quantity for \( \mu \) because it
follows a standard normal distribution.
- Rearrange the inequality \( a \leq Q(X, \theta) \leq b \) to isolate \( \theta \), resulting in a confidence
interval. For example, solving \( -1.96 \leq \frac{\bar{X} - \mu}{\sigma / \sqrt{n}} \leq 1.96 \) for \( \mu \)
yields \( \bar{X} - 1.96 \frac{\sigma}{\sqrt{n}} \leq \mu \leq \bar{X} + 1.96 \frac{\sigma}{\sqrt{n}} \).
- Based on the observed data, calculate the interval. The resulting interval provides an estimate for the
parameter \( \theta \) at the specified confidence level.
### Example: Confidence Interval for the Mean of a Normal Distribution (Known Variance)
Suppose \( X_1, X_2, \ldots, X_n \) are i.i.d. random variables from a normal distribution \( N(\mu,
\sigma^2) \), with known variance \( \sigma^2 \). We want to find a confidence interval for \( \mu \).
1. **Pivotal Quantity**:
- The standardized sample mean \( \frac{\bar{X} - \mu}{\sigma / \sqrt{n}} \) follows a standard normal
distribution, i.e., \( \frac{\bar{X} - \mu}{\sigma / \sqrt{n}} \sim N(0, 1) \).
- For a 95% confidence level, use the critical values \( -1.96 \) and \( 1.96 \) from the standard normal
distribution.
\[
\]
\[
\bar{X} - 1.96 \frac{\sigma}{\sqrt{n}} \leq \mu \leq \bar{X} + 1.96 \frac{\sigma}{\sqrt{n}}
\]
- The interval \( \left( \bar{X} - 1.96 \frac{\sigma}{\sqrt{n}}, \bar{X} + 1.96 \frac{\sigma}{\sqrt{n}} \right)
\) is a 95% confidence interval for \( \mu \).
**Advantages**:
- The method is widely applicable when a pivotal quantity can be identified, making it versatile for many
different types of data and parameter estimates.
- It can provide exact confidence intervals if the pivotal quantity has an exact known distribution.
**Limitations**:
- Finding a pivotal quantity may not always be straightforward, especially for complex or non-standard
distributions.
- The method often requires assumptions about the form of the population distribution (e.g., normality),
which may not hold in all cases.
The pivotal quantity method is foundational in constructing confidence intervals and is an elegant
approach that leverages known distributions to make inferences about unknown parameters. This
method is central in classical statistics and provides a basis for many confidence interval constructions in
applied statistics.