Solved – What does “unbiasedness” mean

descriptive statisticsmathematical-statisticsunbiased-estimator

  • What does it mean to say that "the variance is a biased estimator".
  • What does it mean to convert a biased estimate to an unbiased estimate through a simple formula. What does this conversion do exactly?
  • Also, What is the practical use of this conversion? Do you convert these scores when using certain kind of statistics?

Best Answer

You can find everything here. However, here is a brief answer.

Let $\mu$ and $\sigma^2$ be the mean and the variance of interest; you wish to estimate $\sigma^2$ based on a sample of size $n$.

Now, let us say you use the following estimator:

$S^2 = \frac{1}{n} \sum_{i=1}^n (X_{i} - \bar{X})^2$,

where $\bar{X} = \frac{1}{n} \sum_{i=1}^n X_i$ is the estimator of $\mu$.

It is not too difficult (see footnote) to see that $E[S^2] = \frac{n-1}{n}\sigma^2$.

Since $E[S^2] \neq \sigma^2$, the estimator $S^2$ is said to be biased.

But, observe that $E[\frac{n}{n-1} S^2] = \sigma^2$. Therefore $\tilde{S}^2 = \frac{n}{n-1} S^2$ is an unbiased estimator of $\sigma^2$.

Footnote

Start by writing $(X_i - \bar{X})^2 = ((X_i - \mu) + (\mu - \bar{X}))^2$ and then expand the product...

Edit to account for your comments

The expected value of $S^2$ does not give $\sigma^2$ (and hence $S^2$ is biased) but it turns out you can transform $S^2$ into $\tilde{S}^2$ so that the expectation does give $\sigma^2$.

In practice, one often prefers to work with $\tilde{S}^2$ instead of $S^2$. But, if $n$ is large enough, this is not a big issue since $\frac{n}{n-1} \approx 1$.

Remark Note that unbiasedness is a property of an estimator, not of an expectation as you wrote.

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