The a priori procedure (APP) for estimating median under skew normal settings with applications in economics and finance

Abstract

PurposeThe authors’ conclusions are based on mathematical derivations that are supported by computer simulations and three worked examples in applications of economics and finance. Finally, the authors provide a link to a computer program so that researchers can perform the analyses easily.Design/methodology/approachBased on a parameter estimation goal, the present work is concerned with determining the minimum sample size researchers should collect so their sample medians can be trusted as good estimates of corresponding population medians. The authors derive two solutions, using a normal approximation and an exact method.FindingsThe exact method provides more accurate answers than the normal approximation method. The authors show that the minimum sample size necessary for estimating the median using the exact method is substantially smaller than that using the normal approximation method. Therefore, researchers can use the exact method to enjoy a sample size savings.Originality/valueIn this paper, the a priori procedure is extended for estimating the population median under the skew normal settings. The mathematical derivation and with computer simulations of the exact method by using sample median to estimate the population median is new and a link to a free and user-friendly computer program is provided so researchers can make their own calculations.