Ask unbiased estimator of $\sigma ^2$ in normal distribution when either $\mu$ known or $\mu$ unknown?

probabilityprobability distributionsstatistics

If $\mu$ is unknown, then $\frac{1}{n-1} \sum_{i=1}^n (X_i – \overline X)^2$ is the unbiased estimator of $\sigma ^2$.

However, if $\mu$ is known, then $\frac{1}{n} \sum_{i=1}^n (X_i – \mu)^2$ is the unbiased estimator of $\sigma ^2$.

I am very confused. From introductory statistics class, I know that given any random population, $E(S^2)$ is always equal to $\sigma ^2$. Hence, for a normal distribution, I think the sample variance = $\frac{1}{n-1} \sum_{i=1}^n (X_i – \overline X)^2$ should always be unbiased.

Best Answer

Of course if the mean is a known value it is self evident that it is better to use it instead of using an estimation of the mean...to understand if the "natural" estimator for $\sigma^2$ is biased / unbiased it is enough to calculate its expectation

$$\frac{1}{n}E(\Sigma_iX_i^2-2\mu\Sigma_iX_i+n\mu^2)=E(X^2)-2\mu^2+\mu^2=\sigma^2+\mu^2-2\mu^2+\mu^2=\sigma^2$$


Furthermore observe that you are in a Gaussian model, thus it is important to realize that

$$\frac{\Sigma_i(X_i-\overline{X}_n)^2}{\sigma^2}\sim \chi_{(n-1)}^2$$

while

$$\frac{\Sigma_i(X_i-\mu)^2}{\sigma^2}\sim \chi_{(n)}^2$$

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