The major use of inferential statistics is to use information from a sample to infer

something about a population.

The methods of inference used to support or reject claims based on sample data are
known as tests of significance.

A population is a collection of data whose properties are analyzed. The population is the
complete collection to be studied, it contains all subjects of interest.

A sample is a part of the population of interest, a sub-collection selected from a

population.

A parameter is a numerical measurement that describes a characteristic of a population,

while a sample is a numerical measurement that describes a characteristic of a sample. In
general, we will use a statistic to infer something about a parameter.

A confidence interval gives an estimated range of values which is likely to include an

unknown population parameter, the estimated range being calculated from a given set of
sample data.
The significance level for a given hypothesis test is a value for which a P-value less
than or equal to is considered statistically significant. Typical values for are 0.1,
0.05, and 0.01. These values correspond to the probability of observing such an extreme
value by chance.

Every test of significance begins with a null hypothesis H0. H0 represents a theory that
has been put forward, either because it is believed to be true or because it is to be used as
a basis for argument, but has not been proved. For example, in a clinical trial of a new
drug, the null hypothesis might be that the new drug is no better, on average, than the
current drug. We would write H0: there is no difference between the two drugs on
average.

The alternative hypothesis, Ha, is a statement of what a statistical hypothesis test is set up
to establish. For example, in a clinical trial of a new drug, the alternative hypothesis
might be that the new drug has a different effect, on average, compared to that of the
current drug. We would write Ha: the two drugs have different effects, on average. The
alternative hypothesis might also be that the new drug is better, on average, than the
current drug. In this case we would write Ha: the new drug is better than the current drug,
on average.

Type I error
A type I error occurs when one rejects the null hypothesis when it is true. The probability
of a type I error is the level of significance of the test of hypothesis, and is denoted by
*alpha*
Type II error
A type II error occurs when one rejects the alternative hypothesis (fails to reject the null
hypothesis) when the alternative hypothesis is true. The probability of a type II error is
denoted by *beta*
The power of a test is the probability that a fixed level significance test will reject
the null hypothesis H0 when a particular alternative value of the parameter is true.

The Standard Error of the Mean (SE(M)) is analogous to the Standard Deviation (SD),
in that it is an estimate of variability. It is different, however, in that while the Standard
Deviation gives one a sense of how much variability there is in the individual values that
make up one single sample, the Standard Error of the Mean gives one a sense of how
much variability there is in the means of small samples (of n individual values) of a larger
population.

Standard Error of the Mean:

Significance Level

A Type I error occurs when the researcher rejects a null hypothesis when it is true. The
probability of committing a Type I error is called the significance level, and is often
denoted by α.

Degrees of freedom (df) of an estimate is the number of independent pieces of

information on which the estimate is based.

How to Conduct Hypothesis Tests

All hypothesis tests are conducted the same way. The researcher states a hypothesis to be
tested, formulates an analysis plan, analyzes sample data according to the plan, and
accepts or rejects the null hypothesis, based on results of the analysis.

 State the hypotheses. Every hypothesis test requires the analyst to state a null
hypothesis and an alternative hypothesis. The hypotheses are stated in such a way
that they are mutually exclusive. That is, if one is true, the other must be false;
and vice versa.

 Formulate an analysis plan. The analysis plan describes how to use sample data
to accept or reject the null hypothesis. It should specify the following elements.
o Significance level. Often, researchers choose significance levels equal to
0.01, 0.05, or 0.10; but any value between 0 and 1 can be used.
o Test method. Typically, the test method involves a test statistic and a
sampling distribution. Computed from sample data, the test statistic might
be a mean score, proportion, difference between means, difference
between proportions, z-score, t-score, chi-square, etc. Given a test statistic
 and its sampling distribution, a researcher can assess probabilities
associated with the test statistic. If the test statistic probability is less than
the significance level, the null hypothesis is rejected.
 Analyze sample data. Using sample data, perform computations called for in the
analysis plan.
o Test statistic. When the null hypothesis involves a mean or proportion, use
either of the following equations to compute the test statistic.

Test statistic = (Statistic - Parameter) / (Standard deviation of statistic)

Test statistic = (Statistic - Parameter) / (Standard error of statistic)

where Parameter is the value appearing in the null hypothesis, and

Statistic is the point estimate of Parameter. As part of the analysis, you
may need to compute the standard deviation or standard error of the
statistic. Previously, we presented common formulas for the standard
deviation and standard error.

When the parameter in the null hypothesis involves categorical data, you
may use a chi-square statistic as the test statistic. Instructions for
computing a chi-square test statistic are presented in the lesson on the chi-
square goodness of fit test.

o P-value. The P-value is the probability of observing a sample statistic as

extreme as the test statistic, assuming the null hypotheis is true.

 Interpret the results. If the sample findings are unlikely, given the null
hypothesis, the researcher rejects the null hypothesis. Typically, this involves
comparing the P-value to the significance level, and rejecting the null hypothesis
when the P-value is less than the significance level.

Parametric Test: A statistical test that involves data that are assumed to be distributed
according to some distribution, usually normal, whose parameters are known, such as
data from interval or ratio scales.

Nonparametric tests are also referred to as distribution-free tests. These tests have the
obvious advantage of not requiring the assumption of normality or the assumption of
homogeneity of variance. They compare medians rather than means and, as a result, if the
data have one or two outliers, their influence is negated.