58 Sample size and the t distribution

This video explores the relationship between the T-distribution and the normal distribution in econometrics. We delve into why the T-distribution is necessary when dealing with estimated variances and how it visually converges to the normal distribution as the sample size increases. Understanding this convergence is crucial for grasping asymptotic theory and practical applications in econometrics. Econometricians often use the T-distribution because variances are typically estimated, and sample sizes may not always be very large. This video explains that the T-distribution is essentially the cost incurred for estimating the variance, a fundamental concept when the true variance is unknown. We will also touch upon how this relationship is reflected in T-table values, showing how they approach Z-scores for large sample sizes. Subscribe to @AxiomTutoringCourses.