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I encountered such a formula for pooled variance:

$$\frac{(n-1)s_x^2+(m-1)s_y^2}{n+m-2}\left(\frac{1}{n} + \frac{1}{m}\right)$$

Here we have two samples of the following sizes $n$ and $m$. $s_x, s_y$ are the sample variances.

I understand that the first term is a weighted average, but from the second term comes?

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$Var[\bar{x}-\bar{y}] = Var[\bar{x}] + Var[\bar{y}] = \frac{\sigma_x^2}{n} + \frac{\sigma_y^2}{m}$

Now we assume that $x$ and $y$ come from populations with the same variance then $\sigma_y^2=\sigma_x^2=\sigma^2$.

The expression for variance becomes:

$Var[\bar{x}-\bar{y}] = \sigma^2 \left(\frac{1}{n} + \frac{1}{m}\right)$

Since we are assuming that X and Y have the same variance we can estimate $\sigma^2$ using the pooled variance. (Edit: As whuber mentions in his comment, using the pooled variance assumes that $\bar{X}$ and $\bar{Y}$ are independant and also that $\mu_x=\mu_y$)

$\sigma^2 = \frac{(n-1)s_x^2+(m-1)s_y^2}{n+m-2}$

And therefore:

$$Var[\bar{x}-\bar{y}] = \frac{(n-1)s_x^2+(m-1)s_y^2}{n+m-2}\left(\frac{1}{n} + \frac{1}{m}\right)$$

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    $\begingroup$ Since you are being careful about mentioning the assumptions needed to carry out this analysis, consider including two additional crucial ones: first, that $\bar x$ and $\bar y$ are independent; and then, to justify the pooling, that you have implicitly assumed the two populations also have the same mean. $\endgroup$
    – whuber
    Dec 29, 2017 at 13:53
  • $\begingroup$ @whuber Thanks I never realised that pooled variance requires assuming that population means are equal. I think that only for gaussian $X$ the sample mean is independant from the sample variance. So in the case that $X$ and $Y$ are gaussian distributed we can forgo the assumption that population means are equal. Is that correct? $\endgroup$
    – Hugh
    Dec 29, 2017 at 16:10
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    $\begingroup$ The problem is more basic than that: if the population means are not equal, then the pooled variance does not estimate anything relevant to the distribution of the $t$ statistic. In the testing situation where variances are pooled, the null hypothesis is that means are equal, thereby justifying the pooling. For any other hypothesis, it's (at best) unclear what the pooled formula would represent or how it could be useful. $\endgroup$
    – whuber
    Dec 29, 2017 at 16:14
  • $\begingroup$ @Whuber That is a good point. What if we just want to know the variance of $\bar{x}+\bar{y}$ to create a prediction interval but not to test a hypothesis? $\endgroup$
    – Hugh
    Dec 29, 2017 at 16:37
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    $\begingroup$ Minor point but you should also say that the final result is an estimate of the variance of the difference between the two sample means. $\endgroup$ Dec 29, 2017 at 21:33

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