The Central Limit Theorem
The Central Limit Theorem (CLT)
Formal statement: If are i.i.d. with mean and standard deviation , then for large :
Conditions for the CLT to apply:
- Sample size (rough guideline for non-normal populations)
- Individual observations must be independent (check: 10% condition)
Why is the CLT so important?
- It allows inference even when the population is not normal
- It explains why the normal distribution appears so often in practice
- It is the theoretical foundation for confidence intervals and hypothesis tests in Units 6-9