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= Level of Significance
TS = Test Statistics
TV = Table Value
HYPOTHESIS TESTING
Hypothesis Testing
Procedure
Hypothesis
Statement about
one or more
populations
Null
Hypothesis H0
Tested for
possible
rejection.
Always
includes =
sign.
It is based on sample
statistics & probability
theory.
It is used to determine
whether a hypothesis is a
reasonable statement or
not.
Two
Types
Alternative
Hypothesis
Ha
Hypothesis
which is
accepted
should the null
hypothesis be
rejected.
Test Statistics
Hypothesis testing involves
two statistics:
TS calculated from
sample data.
critical values of TS.
Two Types of
Errors
Type I Error
Rejecting a
true null
hypothesis.
Type II Error
Failing to reject a
false null
hypothesis.
Decision Rule
Based on comparison of TS to
specified value(s).
It is specific & quantitative.
Significance
Level ( )
Probability of
making a type I
error.
Denoted by
Greek letter
alpha ( ).
Used to identify
critical values.
Statistical Significance vs
Economical Significance
Statistically significant results
may not necessarily be
economically significant.
A very large sample size may
result in highly statistically
significant results that may be
quite small in absolute terms.
SS = Sample Statistic
CV = Critical Value
SE = Standard Error
Testing
Population Mean
2 known
N. dist.
n 30
2 unknown
Decision Rule
x 0
z=
2 unknown
n<30
N. dist.
or
=
/
x 0
t n1 =
Unknown variances
assumed equal.
n1 n2 2
+
; df = n-1
( x1 x2 ) (1 2 )
1 1
sP
+
n1 n2
( n1 1) s1 + ( n2 1) s 2
n1 + n2 2
t=
Populations based
on Independent
Unequal unknown
variances.
Reject H0 if TS > TV
df = n1+n2 - 2
Distributed
Ho: = 0 vs Ha: 0
Reject H0 if TS > TV or TS < TV
where;
sP =
Normally
=
*(more conservative)
Means of Two
Samples.
Power of a Test
1 P(type II error).
Probability of correctly rejecting
a false null hypothesis.
Test Statistics
t(
Equality of the
p- value
The smallest level of significance
at which null hypothesis can be
rejected.
Reject H0 if p-value < .
Conditions
df = Degree of Freedom
n 30 = Large Sample
n< 30 = Small Sample
n = Sample Size
( x1 x 2 ) ( 1 2 )
s12 s 22
+
n1 n2
2
s12 s22
+
n n2
d . f = 12
2
s12
s22
n
1
+ n2
n1
n2
Ho:1 - 2 = 0 vs Ha: 1 - 2 0
Reject H0 if TS > TV or TS < TV
Paired Comparisons
Test
TS t(n-1 )=
1
= .
S =
=
S
( )
1
Testing Variance of a
N.dist. Population
TS
1
Decision Rule
Reject H0 if TS > TS
Chi-Square
Distribution
Asymmetrical.
Bounded from below
by zero.
Chi-Square values
can never be ve.
Testing Equality of
Two Variances from
N.dist. Population
TS
;
>
Parametric Test
Specific to population
parameter.
Relies on assumptions
regarding the distribution of
the population.
Non-Parametric Test
Decision Rule
Reject H0 if TS > TV
F- Distribution
Right skewed.
Bounded by zero.
Decision Rule
H0: d d0 vs Ha: d > d0
Reject H0 if TS > TV.
H0: d d0 vs Ha:d < d0
Reject H0 if TS <-TV
H0: d = d0 vs Ha: d d0
Reject H0 if TS > TV.