Confidence interval (CI) is a type of interval estimate of a population parameter. It is an observed interval (i.e. it is calculated from the observations), in principle different from sample to sample, that frequently includes the parameter of interest if the experiment is repeated. How frequently the observed interval contains the parameter is determined by the confidence level or confidence coefficient. More specifically, the meaning of the term “confidence level” is that, if confidence intervals are constructed across many separate data analyses of repeated (and possibly different) experiments, the proportion of such intervals that contain the true value of the parameter will match the confidence level; this is guaranteed by the reasoning underlying the construction of confidence intervals.
Whereas two-sided confidence limits form a confidence interval, their one-sided counterparts are referred to as lower or upper confidence bounds.
Confidence intervals consist of a range of values (interval) that act as good estimates of the unknown population parameter; however, in infrequent cases, none of these values may cover the value of the parameter. The level of confidence of the confidence interval would indicate the probability that the confidence range captures this true population parameter given a distribution of samples. It does not describe any single sample. This value is represented by a percentage, so when we say, “we are 99% confident that the true value of the parameter is in our confidence interval”, we express that 99% of the observed confidence intervals will hold the true value of the parameter. After a sample is taken, the population parameter is either in the interval made or not; it is not a matter of chance. The desired level of confidence is set by the researcher (not determined by data). If a corresponding hypothesis test is performed, the confidence level is the complement of respective level of significance, i.e. a 95% confidence interval reflects a significance level of 0.05.
The confidence interval contains the parameter values that, when tested, should not be rejected with the same sample. Greater levels of variance yield larger confidence intervals, and hence less precise estimates of the parameter. Confidence intervals of difference parameters not containing 0 imply that there is a statistically significant difference between the populations.
In applied practice, confidence intervals are typically stated at the 95% confidence level.
However, when presented graphically, confidence intervals can be shown at several confidence levels, for example 50%, 95% and 99%.
Certain factors may affect the confidence interval size including size of sample, level of confidence, and population variability. A larger sample size normally will lead to a better estimate of the population parameter.
A confidence interval does not predict that the true value of the parameter has a particular probability of being in the confidence interval given the data actually obtained. Intervals with this property, called credible intervals, exist only in the paradigm of Bayesian statistics, as they require postulation of a prior distribution for the parameter of interest.