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Research Methodology Notes for MBA

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Hypothesis

A hypothesis is an assumption or a statement that may or may

not be true

The hypothesis is tested on the basis of information obtained

from a sample

Instead of asking, for example, what the mean assessed value

of an apartment in a multistoried building is, one may be

interested in knowing whether or not the assessed value equals

some particular value, say Rs.80 lakh

Example whether a new drug is more effective than the

existing drug based on the sample data?

Example whether the proportion of smokers in a class is

different from 0.30?

Null Hypothesis

The hypotheses that are proposed with the intent of receiving a

rejection for them are called null hypotheses

This requires that we hypothesize the opposite of what is

desired to be proved

For example, if we want to show that sales and advertisement

expenditure are related, we formulate the null hypothesis that

they are not related

If we want to prove that the average wages of skilled workers

in town 1 is greater than that of town 2, we formulate the null

hypotheses that there is no difference in the average wages of

the skilled workers in both the towns

A null hypothesis is denoted by H0

Alternative Hypothesis

Rejection of null hypotheses leads to the acceptance of

alternative hypotheses

The rejection of null hypothesis indicates that

advertisement expenditure) have statistical significance

o the difference between means (e.g., wages of skilled workers

in town 1 and 2) have statistical significance

o the difference between proportions have statistical

significance

The acceptance of the null hypotheses indicates that these

differences are due to chance

The alternative hypotheses are denoted by H 1

One-tailed & Two-tailed tests

A test is called one-tailed only if the null hypothesis gets

rejected when a value of the test statistic falls in one specified

tail of the distribution

A test is called two-tailed if null hypothesis gets rejected when

a value of the test statistic falls in either one or the other of the

two tails of its sampling distribution

Two-tailed test Example

Consider a soft drink bottling plant which dispenses soft drinks

in bottles of 300 ml capacity

The bottling is done through an automatic plant

An overfilling of bottle (liquid content more than 300 ml) means

a huge loss to the company given the large volume of sales

An under filling means the customers are getting less than 300

ml of the drink when they are paying for 300 ml

This could bring bad reputation to the company

The company wants to avoid both overfilling and under filling

Therefore, it would prefer to test the hypothesis whether the

mean content of the bottles is different from 300 ml

This hypothesis could be written as: H 0 : = 300 ml; H1 :

300 ml

The hypotheses stated above are called two-tailed hypotheses

One-tailed test Example

H0 : = 300 ml; H1 : > 300 ml;

Such hypotheses are called one-tailed hypotheses and the

researcher would be interested in the upper tail (right hand tail)

of the distribution

If the concern is loss of reputation of the company (under filling

of the bottles), the hypothesis may be stated as:

H0 : = 300 ml; H1 : < 300 ml;

The hypothesis stated above is also called one-tailed test and

the researcher would be interested in the lower tail (left hand

tail) of the distribution

Type 1 & Type 2 Error

Type-1 error It is the probability of rejecting the H 0 when it is

true. It is denoted as . In QC, it is termed as producers risk,

because it is the probability of rejecting a good lot

Type-2 error It is the probability of accepting the H 0 when it

is false. It is denoted as . In QC, it is termed as consumers

risk, because it is the probability of accepting a bad lot

The expression (1 ) is called power of test

To decrease the risk of committing both types of errors, one

may increase the sample size

Decision

sample

based

on

H0 is true

H0 is false

Reject H0

Type-1 error

Correct Decision

Accept H0

Correct Decision

Type-2 error

Formulation of Hypothesis

While designing any hypotheses, there are a few criteria that the

researcher must fulfill. These are:

It must be formulated in simple, clear, and declarative form

To test only one relationship between only 2 variables at a time

for the new diet drink will have positive impact on brand

awareness of the drink

turnover intention

A hypothesis must be measurable and quantifiable

The validation of the hypothesis would necessarily involve

testing the statistical significance of the hypothesized relation

Testing of Hypothesis

The following steps are followed in the testing of a hypothesis:

significance denotes the probability of rejecting the null

hypothesis when it is true. The value of varies from problem

to problem, but usually it is taken as either 5 % or 1 %

2

F or test statistic & what is to be used depends on various

assumptions

drawn from the population, it is very important to specify the

values of test statistic that will lead to rejection or acceptance

of the null hypothesis. The one that leads to the rejection of

null hypothesis is called the critical region. Given , the optimal

critical region for a two-tailed test consists of that /2 % area in

the RH tail of the distribution plus that /2 % in the LH of the

distribution where that null hypothesis is rejected

Computing the value of test-statistic

Inference H0 may be rejected or accepted depending upon

whether the computed value falls in the rejection or the

acceptance region

Degrees of Freedom (d.f.)

The d.f. is the no. of values in a calculation that we can vary

the values are 20,10, 50, and one unknown value, x. Then we

can determine that x = 20

Suppose that we know the mean of a data set is 25, with values

20, 10, and two unknown values, say x & y

Means (20 + 10 + x + y)/4 = 25. we have 30 + x + y = 100

or x + y = 70. With this we obtain y = 70 - x;

Once we choose a value for x, the value for y is determined.

This shows that there is 1 d.f.

Now we'll look at a sample size of 100. If we know that the

mean of this sample data is 20, but do not know the values of

any of the data, then there are 99 d.f. All values must add up

to a total of 20 x 100 = 2000. Once we have the values of 99

elements in the data set, then the last one can be determined

If the size of the given sample is n, then the d.f. will be (n-1).

In the contingency table the d.f. is calculated in a slightly

different manner. If the order of CT is r x c, then the d.f. will be

(r 1)(c 1) where r = # of rows & c = # of columns

2-test

The chi-square test is widely used in research. For the use of

chi-square test, data is required in the form of frequencies

Data expressed in percentages or proportion can also be used,

provided it could be converted into frequencies

The majority of the applications of chi-square ( 2) are with

discrete data

Unlike the normal and t distribution, the chi-square distribution

is not symmetric

The values of a chi-square are greater than or equal to zero

The shape of a chi-square distribution depends upon the

degrees of freedom*

With the increase in degrees of freedom, the distribution tends

to normal

2-test applications

Goodness of Fit 2-test is used to find out how well the

theoretical distribution fit with the empirical distribution of

observed distribution obtained from the sample data

whether 2 or more attributes are associated or not?

Equality of more than two population proportions For

example, the interest may be in determining whether in an

organization, the proportion of the satisfied employees in 4

categories, viz., class I, class II, class III and class IV employees

is the same?

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