Statistics Terms and Concepts

The random variable, X

The outcome of one single occurrence; Mean = , Standard Deviation =

The random variable, X

The average outcome of n occurrences; Mean = , Standard Deviation = *
n

*( is called the standard error)
n

Distribution of X -- the determination of the type of hypothesis test or confidence interval used
If X is normal and is known, then X is normal
If X is normal and is unknown, then X has a t-distribution
Even if X is not normal, if is known X is approximately normal if n is large*
Even if X is not normal, if is unknown X has approximately a t-distribution if n is
large*
*( This is the Central Limit Theorem)

Requirement for doing confidence intervals and hypothesis tests

(1) Sampling from a normal distribution OR (2) Take a large sample, n.

Confidence Intervals -- Meaning

A 95% confidence interval* means that if repeated samples of size n are taken and
confidence intervals constructed according to the formulas, in the long run 95% of
these intervals will contain the true value of .
*(In this case 95% is called the confidence level, .95 is called the confidence
coefficient, and = .05 is the proportion that will NOT contain .)

Form of Confidence Interval for : Point Estimate Margin of Error

Point Estimate for -- x x is the best single guess for
Margin of Error:

If is known: z-intervals: z/2(Standard Error) = z /2 *
n

s
If is unknown: t-intervals: t/2,n-1 (Standard Error) = t /2 ,n 1 *
n
*( z/2 means the z-value that puts probability /2 to the right of this z-value;
t/2,n-1 means the t-value that puts /2 to the right of this t-value with n-1
degrees of freedom)

Calculating Correct Sample Sizes to Meet a Specific Margin of Error (E) (with and given)

1. Set z /2 = E.
n

2. Then n = z /2 -- Solve for n
E

3. n = ( n )2 --- most likely this will give a number with a decimal --- ROUND UP!
Hypothesis Tests Basic Idea
You are satisfied (you prove that) > v if x is a lot greater than v.
You are satisfied (you prove that) < v if x is a lot less than v.
You are satisfied (you prove that) v if x is a lot different from v (higher or lower).

The Hypotheses
Null Hypothesis: H0: = v
Alternate Hypothesis: HA: > v OR < v OR v

What you are trying to show is the alternate hypothesis. You must get strong
evidence to show this is true. The null hypothesis is the one you cannot reject unless
you get strong evidence to the contrary.

We reject or do not reject the null hypothesis we never accept it!

We accept or say we do not have enough evidence to accept the alternate hypothesis.

Level of Significance the risk you are willing to take of concluding HA is true when its not*
This is . We assign this.
*(This is called a TYPE I Error)

xv
Form of the Test Statistic (z or t) -- how many standard errors x is from v:
Standard Error
xv xv
z t
For z-tests, , For t-tests, s
n n

Form of the Hypothesis Tests* -- (i.e. What is a lot?)

> Tests
z-test: Reject H0 (Accept HA) if z > z t-test: Reject H0 (Accept HA) if t > t,n-1
< Tests
z-test: Reject H0 (Accept HA) if z < -z t-test: Reject H0 (Accept HA) if t < -t,n-1
Tests
z-test: Reject H0 (Accept HA) if |z| > z/2 t-test: Reject H0 (Accept HA) if |t| > t/2,n-1

p-value -- Low p-values (< ) prove HA is true

> tests: p-value = probability of getting greater than the x value we got (area to the right)
< tests: p-value = probability of getting less than the x value we got (area to the left)
tests: p-value = probability of getting greater an x value further away than the one we
got (= twice the area in the tail)

Calculating the probability of not concluding HA is true when it is* for a given true value of
*(This is called a TYPE II error)

x x
1. Express the test in terms of . For a > test: Accept HA if > v + z n = xcrit
 x crit
2. For a > test Find z for the given value of : z = . is the area to the left of
n
z.
 EXCEL APPROACHES
Must be sampling from a normal distribution or take a large sample
Use z with known and t with unknown

z-intervals
1. Calculate x by: =AVERAGE(of the column of xs)
2. Calculate the Margin of Error by: =CONFIDENCE(, , n)
3. LCL: x - Margin of Error UCL: x + Margin of Error

t-intervals
1. Go to Data Analysis/Descriptive Statistics Input Range: (The column of xs)
Check Summary Statistics and Confidence Level for Mean
2. From output LCL: Mean Confidence UCL: Mean + Confidence

z-tests for HA: > v OR < v OR v

1. Calculate x by: =AVERAGE(of the column of xs)
2. Calculate z by: =( x - v)/(/SQRT(n))
3. Get p-value:
> Tests p-value = 1-NORMSDIST(z)
< Tests p-value = NORMSDIST(z)
Tests and z >0 p-value = 2*(1-NORMSDIST(z))
Tests and z <0 p-value = 2*NORMSDIST(z)
4. If p-value < , enough evidence to conclude HA is true
If p-value > , not enough evidence to conclude HA is true

t-tests for HA: > v OR < v OR v

1. Go to Data Analysis/Descriptive Statistics Input Range: (The column of xs)
Check Summary Statistics and Confidence Level for Mean
2. From output, calculate t by: =(Mean- v)/Standard Error
3. Get p-value:
> Tests with t > 0 p-value = TDIST(t,n-1,1)
< Tests with t < 0 p-value = TDIST(-t,n-1,1)
Tests with t > 0 p-value = TDIST(t,n-1,2)
Tests with t < 0 p-value = TDIST(-t,n-1,2)
4. If p-value < , enough evidence to conclude HA is true
If p-value > , not enough evidence to conclude HA is true