Confidence interval
A range around a sample estimate built so that, across repeated samples, it would contain the true parameter a stated share of the time, such as 95 per cent. It allows for sampling error, not for bias.
Where you will meet it
Confidence interval appears in 2 learning outcomes on the CFA syllabus. A few of them:
- Explain what a confidence interval around a population mean tells you
“A confidence interval for a population mean is the sample mean plus or minus a reliability factor times the standard error, where the standard error is the sample standard deviation divided by the square root of n.”
- Say what the central limit theorem states and what follows from it
“This is what makes inference possible in practice: an analyst can build a confidence interval or run a hypothesis test about a mean without knowing the population's distribution.”
See also
Practise it
Practise confidence interval until it is automatic: questions that explain every wrong option.
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