Ratio and Regression Method of Estimation
2.4 Ratio Method Concept and rationale of Auxiliary Variable An auxiliary variable is an additional variable that is related to the main variable of interest in a statistical study but is not directly of interest itself. It is often used to improve the efficiency of an estimation process. The auxiliary variable is known or observed alongside the variable of interest and helps in reducing the variance of the estimates when used appropriately. The ratio method is most effective in situations where the auxiliary variable is easy to measure, and there is a strong linear relationship between the auxiliary and study variables. The method works best when the ratio of the two variables remains relatively stable across the population. Rationale for Using Auxiliary Variables Improving Precision : Auxiliary variables can significantly reduce the variance of the estimators, leading to more precise estimates. This is particularly useful when direct measurements of the main ...