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RatioandRegressionMethodofEstimation Lecture7 10

The ratio method of estimation uses additional information related to the variable being studied, called the benchmark variable, to create a ratio estimator. The ratio estimator of the population total is calculated as the sample total of the variable divided by the sample total of the benchmark variable, multiplied by the population total of the benchmark variable. This ratio estimator is more precise than a simple estimator if there is a high correlation between the benchmark variable and the variable being studied. The ratio estimator is generally biased but consistent, though it can be made unbiased by selecting the first unit of the sample with probability proportional to the benchmark variable and selecting the remaining units with equal probability. The regression method is similar but does not assume the relationship passes through the origin, making it

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29 views30 pages

RatioandRegressionMethodofEstimation Lecture7 10

The ratio method of estimation uses additional information related to the variable being studied, called the benchmark variable, to create a ratio estimator. The ratio estimator of the population total is calculated as the sample total of the variable divided by the sample total of the benchmark variable, multiplied by the population total of the benchmark variable. This ratio estimator is more precise than a simple estimator if there is a high correlation between the benchmark variable and the variable being studied. The ratio estimator is generally biased but consistent, though it can be made unbiased by selecting the first unit of the sample with probability proportional to the benchmark variable and selecting the remaining units with equal probability. The regression method is similar but does not assume the relationship passes through the origin, making it

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Ratio Method of Estimation

If ancillary or supplementary information is


available for each of the units of the population, it
can under suitable conditions, be used in several
ways to improve the efficiency of the estimators of
the variable under investigation (estimand). The
supplementary information must be correlated with
the variable under study. This method of estimation
is usually appreciated and generally gives more
precise estimates regarding population total as
compared to the simple estimation method. The
supplementary information usually referred to as
benchmark variable or Auxiliary Variable.
The term ratio estimation applies to a widely used class of
estimation plan which incorporates the prior information
including individual values, which is closely related to the
variable under investigation for all units of the population.
Such situations arise very frequently in practice, especially
where the variables under consideration are the current level of
some economic variable (such as retail sales) and the results of
a survey giving some previous level of that variable. Ratio
estimators can be formed corresponding to any selection plan,
but in this Chapter attention will be confined to simple and
stratified random sampling. Ikeda-Mizuno-Sen- Lahiri
selection procedure in which the first unit is selected with
probability proportional to the measure of size and remaining
n-1 units with equal probability and without replacement will
also be described. This makes the ratio estimator unbiased of
population total Y.
Ratio estimator contains bias and consistent. It is
applicable when sample size is large. Ratio estimator
has the following properties:

• ratio estimator is generally biased, but the bias


decreases as the sample size increases as in case of
unbiased estimation and the distribution of r tends to
normality (this is a property of consistent estimator),
and
• the mean square error of ratio estimator is smaller
than that of unbiased estimator, if there is high
correlation between benchmark variable and
estimand.
Ratio Method of Estimation
A method of estimation in which we use some additional information related to the current variable of
the study as ratio is called the ratio method of estimation and the estimator is called the ratio estimator.
The additional variable is generally called a bench mark variable and is denoted by “X”. The ratio
estimator of population total is given

(Mean)
Where
x = Total of sample from X
y = Total of sample from Y
X = Total of population from X
Condition under which ratio estimator is more precise than simple estimator

That’s why more efficient and skewed


Ratio Method of Estimation

Theorem: Find and


Proof:
Let us define
Ratio Method of Estimation
Ratio Method of Estimation
Ratio Method of Estimation

Theorem

Prove that ratio estimator will be more precise than the simple estimator.
Ratio Method of Estimation

Proof:
Ratio Method of Estimation

Under this condition ratio estimator is more precise than simple random sample.
Regression estimator is always more precise then ratio estimator.
Unbiased Ratio Estimator
The ratio estimator can be made unbiased by changing the selection procedure of some Lihari
(1951) gave the idea that if 1 st unit of the sample is selected with probability proportional to
aggregate size of “X” of remaining (n-1) units are selected with equal probability (WOR) then
ratio estimator will be unbiased.
To prove this, we proceed as under.
Now if unit is selected at 1st draw and remaining units are selected in the subsequence draws then

If unit is selected at 1st draw of remaining units are selected at the subsequence draws then

The probability of sample in case of two units is therefore


Unbiased Ratio Estimator
For sample size “n”
Unbiased Ratio Estimator

Hence under this condition is an unbiased estimator of Y.


Now,
Unbiased Ratio Estimator
BLUE of Y
Question
Under the linear model with and . The ratio estimator is BLUE of Y.
Solution:
Let us define a general estimator of population parameter.

We also have

Under the model


Now,
Put above equation in (3)

We want to minimize this variance under the condition . For this we use Lagrange’s Multiplier and
minimize and equate to zero.
So,
Now,
Add and subtract
Add and subtract

Note:
In ratio estimator there is a restriction that it passes through origin and have a positive relation where
in regression analysis there is no restriction.
Regression Method of estimation
Regression Method of estimation
When the relation between variable under study
and benchmark variable is linear and does not
pass through the origin, we use another method
of estimation, called regression estimate. Ratio
and regression estimates are identical when the
regression line passes through the origin. In fact
ratio estimate is a special case of regression
estimate.
Regression Method of estimation
Theorem
Find and
Proof:
Let us define
Regression Method of estimation
Comparison Ratio vs Regression
Theorem
Comparison of mean per unit and ratio method estimation with regression method
of estimation.
Proof:

From (3) and (1)


Hence regression estimator is better than simple random sample.
Now,
From (2) and (3)
Under this condition linear regression is better than the ratio estimator.
If regression line passes through origin then ratio estimator is more precise than regression estimator.
i.e.

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