Central Limit Theorem

What is the central limit theorem?
The central limit theorem relies on the concept of a sampling distribution, which is
the probability distribution of a statistic for a large number of samples taken from a
population.
Imagining an experiment may help you to understand sampling distributions:
 Suppose that you draw a random sample from a population and calculate
a statistic for the sample, such as the mean.
 Now you draw another random sample of the same size, and again calculate
the mean.
 You repeat this process many times, and end up with a large number of means,
one for each sample.
The distribution of the sample means is an example of a sampling distribution.
The central limit theorem says that the sampling distribution of the mean will always
be normally distributed, as long as the sample size is large enough. Regardless of
whether the population has a normal, Poisson, binomial, or any other distribution, the
sampling distribution of the mean will be normal.
A normal distribution is a symmetrical, bell-shaped distribution, with increasingly

fewer observations the further from the center of the distribution.
Central limit theorem formula

Fortunately, you don’t need to actually repeatedly sample a population to know the
shape of the sampling distribution. The parameters of the sampling distribution of the
mean are determined by the parameters of the population:
 The mean of the sampling distribution is the mean of the population.
 The standard deviation of the sampling distribution is the standard deviation of

the population divided by the square root of the sample size.
We can describe the sampling distribution of the mean using this notation:
Where:
 X̄ is the sampling distribution of the sample means

 ~ means “follows the distribution”
 N is the normal distribution
 µ is the mean of the population
 σ is the standard deviation of the population
 n is the sample size
Sample size and the central limit theorem

The sample size (n) is the number of observations drawn from the population for each
sample. The sample size is the same for all samples.
The sample size affects the sampling distribution of the mean in two ways.
1. Sample size and normality

The larger the sample size, the more closely the sampling distribution will follow
a normal distribution.
When the sample size is small, the sampling distribution of the mean is sometimes
non-normal. That’s because the central limit theorem only holds true when the sample
size is “sufficiently large.”
By convention, we consider a sample size of 30 to be “sufficiently large.”
 When n < 30, the central limit theorem doesn’t apply. The sampling
distribution will follow a similar distribution to the population. Therefore, the
sampling distribution will only be normal if the population is normal.
 When n ≥ 30, the central limit theorem applies. The sampling distribution will
approximately follow a normal distribution.
2. Sample size and standard deviations

The sample size affects the standard deviation of the sampling distribution. Standard
deviation is a measure of the variability or spread of the distribution (i.e., how wide or
narrow it is).
 When n is low, the standard deviation is high. There’s a lot of spread in the
samples’ means because they aren’t precise estimates of the population’s
mean.
 When n is high, the standard deviation is low. There’s not much spread in the
samples’ means because they’re precise estimates of the population’s mean.
Conditions of the central limit theorem

The central limit theorem states that the sampling distribution of the mean will always
follow a normal distribution under the following conditions:
1. The sample size is sufficiently large. This condition is usually met if the
sample size is n ≥ 30.
1. The samples are independent and identically distributed (i.i.d.) random
variables. This condition is usually met if the sampling is random.
1. The population’s distribution has finite variance. Central limit theorem

doesn’t apply to distributions with infinite variance, such as the Cauchy
distribution. Most distributions have finite variance.
Importance of the central limit theorem

The central limit theorem is one of the most fundamental statistical theorems. In fact,
the “central” in “central limit theorem” refers to the importance of the theorem.

Central Limit Theorem

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What is the central limit theorem?

Imagining an experiment may help you to understand sampling distributions:

The distribution of the sample means is an example of a sampling distribution.

A normal distribution is a symmetrical, bell-shaped distribution, with increasingly

Central limit theorem formula

 The mean of the sampling distribution is the mean of the population.

 The standard deviation of the sampling distribution is the standard deviation of

 X̄ is the sampling distribution of the sample means

Sample size and the central limit theorem

1. Sample size and normality

By convention, we consider a sample size of 30 to be “sufficiently large.”

2. Sample size and standard deviations

Conditions of the central limit theorem

1. The population’s distribution has finite variance. Central limit theorem

Importance of the central limit theorem

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