Question on equation in the CFAI curriculum

[stuartma10]

In the ethics and quantitative methods book, on page 433, there is an equation (10-4) for computing confidence intervals. It is the equation it says that you should divide z-alpha by 2. I can't figure out why you would divide by 2.

On the previous page it states that the notation z-alpha denotes the point of the standard normal distributon such that alpha of the probability remains in the right tail. why would i then divide that by two to compute the reliability factors.

You probably would need to refer to the equation in the book cause my description isn't the greatest.

 

[Niblita75]

From your description, I think that is notation for a two sided test. I don't have the book by my side. Hopefully someone else can chime in.

 

[lola]

The Z value is simply the # of std. deviations a given obs is from the mean. You get the z-value by standardizing an observation ((ob - pop mean) / std. dev) from a given normal distribution. That's why a confidence interval is an interval, i.e. it has an upper and a lower value. So the reliability factor leaves HALF of the probability in each tail, i.e. it's divided in two.

not sure if the above is clear, but feel free to ask to further clarification.

 

[stuartma10]

thanks lola, that helps. I really need to do this quant stuff over and over I think.