QM CH 12 Non Parametric Methods

Slides Prepared by
JOHN S. LOUCKS
St. Edward’s University
© 2005 Thomson/South-Western Slide

1
Chapter 19
Nonparametric Methods
■ Sign Test
■ Wilcoxon Signed-Rank Test
■ Mann-Whitney-Wilcoxon Test
■ Kruskal-Wallis Test
■ Rank Correlation

2
■ Most of the statistical methods referred to as parametric

require the use of interval- or ratio-scaled data.
■ Nonparametric methods are often the only way to
analyze nominal or ordinal data and draw statistical
conclusions.
■ Nonparametric methods require no assumptions about
the population probability distributions.
■ Nonparametric methods are often called distribution-
free methods.

3
■ In general, for a statistical method to be classified as

nonparametric, it must satisfy at least one of the
following conditions.
• The method can be used with nominal data.
• The method can be used with ordinal data.
• The method can be used with interval or ratio data
when no assumption can be made about the
population probability distribution.

4
Sign Test
■ A common application of the sign test involves using

a sample of n potential customers to identify a
preference for one of two brands of a product.
■ The objective is to determine whether there is a
difference in preference between the two items being
compared.
■ To record the preference data, we use a plus sign if
the individual prefers one brand and a minus sign if
the individual prefers the other brand.
■ Because the data are recorded as plus and minus
signs, this test is called the sign test.

5
Sign Test: Small-Sample Case
■ The small-sample case for the sign test should be

used whenever n < 20.
■ The hypotheses are
H 0 : p = .50 No preference for one brand
over the other exists.
H a : p ≠ .50 A preference for one brand
over the other exists.
■ The number of plus signs is our test statistic.
■ Assuming H0 is true, the sampling distribution for
the test statistic is a binomial distribution with p = .5.
■ H0 is rejected if the p-value < level of significance, α.

6
Sign Test: Large-Sample Case
■ Using H0: p = .5 and n > 20, the sampling distribution

for the number of plus signs can be approximated by
a normal distribution.
■ When no preference is stated (H0: p = .5), the sampling
distribution will have:
Mean: µ = .50n
Standard Deviation: σ = .25n
■ The test statistic is: x−µ

z= (x is the number
σ of plus signs)
■ H0 is rejected if the p-value < level of significance, α.

7
■ Example: Ketchup Taste Test

As part of a market research study, a
sample of 36 consumers were asked to taste
two brands of ketchup and indicate a
preference. Do the data shown on the next
slide indicate a significant difference in the
consumer preferences for the two brands? A
B

8
■ Example: Ketchup Taste Test
1 preferred Brand A Ketchup

(+ sign recorded)
1 preferred Brand B Ketchup
(_ sign recorded)
6 had no preference A
B
The analysis will be based on
a sample size of 18 + 12 = 30.

9
■ Hypotheses A B
H 0 : p = .50
No preference for one brand over the other exists
H a : p ≠ .50
A preference for one brand over the other exists

10
■ Sampling Distribution for Number of Plus Signs A B
σ = .25n = .25(30) = 2.74
µ = .5(30) = 15

11
■ Rejection Rule A B
Using .05 level of significance:
Reject H0 if p-value < .05
■ Test Statistic
z = (x – µ)/σ = (18 - 15)/2.74 = 3/2.74 = 1.10
■ p-Value
p-Value = 2(.5000 - .3643) = .2714

12
■ Conclusion A B
Because the p-value > α, we cannot reject H0.
There is insufficient evidence in the sample to conclude
that a difference in preference exists for the two brands
of ketchup.

13
Hypothesis Test About a Median
■ We can apply the sign test by:

• Using a plus sign whenever the data in the sample
are above the hypothesized value of the median
• Using a minus sign whenever the data in the
sample are below the hypothesized value of the
median
• Discarding any data exactly equal to the
hypothesized median

14
■ Example: Trim Fitness Center

A hypothesis test is being conducted
about the median age of female members
of the Trim Fitness Center.
H0: Median Age = 34 years
Ha: Median Age ≠ 34 years
In a sample of 40 female members, 25 are older

than 34, 14 are younger than 34, and 1 is 34. Is there
sufficient evidence to reject H0? Assume α = .05.

15
■ Mean and Standard Deviation

µ = .5(39) = 19.5
σ = .25n = .25(39) = 3.12
■ Test Statistic
z = (x – µ)/σ = (25 – 19.5)/3.12 = 1.76
■ p-Value
p-Value = 2(.5000 − .4608) = .0784

16
■ Rejection Rule
Using .05 level of significance:
■ Conclusion
Do not reject H0. The p-value for this two-tail
test is .0784. There is insufficient evidence in the
sample to conclude that the median age is not 34 for
female members of Trim Fitness Center.

17
Wilcoxon Signed-Rank Test
■ This test is the nonparametric alternative to the

parametric matched-sample test presented in
Chapter 10.
■ The methodology of the parametric matched-sample
analysis requires:
• interval data, and
• the assumption that the population of differences
between the pairs of observations is normally
distributed.
■ If the assumption of normally distributed differences
is not appropriate, the Wilcoxon signed-rank test can
be used.

18
■ Example: Express Deliveries

A firm has decided to select one
of two express delivery services to
provide next-day deliveries to its
district offices.
To test the delivery times of the two services, the
firm sends two reports to a sample of 10 district
offices, with one report carried by one service and the
other report carried by the second service. Do the data
on the next slide indicate a difference in the two
services?

19
District Office OverNight NiteFlite

Seattle 32 hrs. 25 hrs.
Los Angeles 30 24
19 15
Boston 16 15
Cleveland 15 13
New York 18 15
Houston 14 15
Atlanta 10 8
St. Louis 7 9
Milwaukee 16 11
Denver

20
■ Preliminary Steps of the Test

• Compute the differences between the paired
observations.
• Discard any differences of zero.
• Rank the absolute value of the differences from
lowest to highest. Tied differences are assigned
the average ranking of their positions.
• Give the ranks the sign of the original difference
in the data.
• Sum the signed ranks.
. . . next we will determine whether the
sum is significantly different from zero.

21
District Office Differ. |Diff.| Rank Sign. Rank

Seattle 7 10 +10
Los Angeles 6 9 +9
4 7 +7
Boston 1 1.5 +1.5
Cleveland 2 4 +4
New York 3 6 +6
Houston −1 1.5 −1.5
Atlanta 2 4 +4
St. Louis −2 4 −4
Milwaukee 5 8 +8
Denver +44

22
■ Hypotheses
H0: The delivery times of the two services are the
same; neither offers faster service than the other.
Ha: Delivery times differ between the two services;
recommend the one with the smaller times.

23
■ Sampling Distribution of T for Identical Populations
n(n + 1)(2 n + 1) 10(11)(21)

σT = = = 19.62
6 6
T
µT = 0

24
■ Rejection Rule
Using .05 level of significance,
■ Test Statistic
z = (T - µT )/σT = (44 - 0)/19.62 = 2.24
■ p-Value
p-Value = 2(.5000 - .4875) = .025

25
■ Conclusion
Reject H0. The p-value for this two-tail test is
.025. There is sufficient evidence in the sample to
conclude that a difference exists in the delivery times
provided by the two services.

26
Mann-Whitney-Wilcoxon Test
■ This test is another nonparametric method for

determining whether there is a difference between
two populations.
■ This test, unlike the Wilcoxon signed-rank test, is not
based on a matched sample.
■ This test does not require interval data or the
assumption that both populations are normally
distributed.
■ The only requirement is that the measurement scale
for the data is at least ordinal.

27
■ Instead of testing for the difference between the

means of two populations, this method tests to
determine whether the two populations are identical.
■ The hypotheses are:
H0: The two populations are identical

Ha: The two populations are not identical

28
■ Example: Westin Freezers

Manufacturer labels indicate the
annual energy cost associated with
operating home appliances such as
freezers.
The energy costs for a sample of
10 Westin freezers and a sample of 10
Easton Freezers are shown on the next slide. Do the
data indicate, using α = .05, that a difference exists in
the annual energy costs for the two brands of freezers?

29
Westin Freezers Easton Freezers

$55.10 $56.10
54.70
54.50 54.40
53.20 55.40
53.00 54.10
55.50 56.00
54.90 55.50
55.80 55.00
54.00 54.30
54.20 57.00
55.20

30
■ Hypotheses
H0: Annual energy costs for Westin freezers
and Easton freezers are the same.
Ha: Annual energy costs differ for the two
brands of freezers.

31
Mann-Whitney-Wilcoxon Test:
Large-Sample Case
■ First, rank the combined data from the lowest to
the highest values, with tied values being assigned
the average of the tied rankings.
■ Then, compute T, the sum of the ranks for the first
sample.
■ Then, compare the observed value of T to the
sampling distribution of T for identical populations.
The value of the standardized test statistic z will
provide the basis for deciding whether to reject H0.

32
Mann-Whitney-Wilcoxon Test:
Large-Sample Case
• Mean
µT = n1(n1 + n2 + 1)
• Standard Deviation
σ T = 1 12 n1 n2 (n1 + n2 + 1)
• Distribution Form
Approximately normal, provided
n1 > 10 and n2 > 10

33
Westin Freezers Rank Easton Freezers Rank

$55.10 12 $56.10 19
8 54.70 9
54.50 2 54.40 7
53.20 1 55.40 14
53.00 15.5 54.10 4
55.50 10 56.00 18
54.90 17 55.50 15.5
55.80 3 55.00 11
54.00 5 54.30 6
54.20 13 57.00 20
Sum of Ranks 86.5
55.20 Sum of Ranks 123.5

34
σ T = 1 12 n1 n2 (n1 + n2 + 1)
= 1 12 (10)(10)(21)
= 13.23
T
µT = ½(10)(21) = 105

35
■ Rejection Rule
Using .05 level of significance,
■ Test Statistic
z = (T - µT )/σT = (86.5 − 105)/13.23 = -1.40
■ p-Value
p-Value = 2(.5000 - .4192) = .1616

36
■ Conclusion
Do not reject H0. The p-value > α. There is
insufficient evidence in the sample data to conclude
that there is a difference in the annual energy cost
associated with the two brands of freezers.

37
Kruskal-Wallis Test
■ The Mann-Whitney-Wilcoxon test has been extended

by Kruskal and Wallis for cases of three or more
populations.
H0: All populations are identical
Ha: Not all populations are identical
■ The Kruskal-Wallis test can be used with ordinal data

as well as with interval or ratio data.
■ Also, the Kruskal-Wallis test does not require the
assumption of normally distributed populations.

38
Kruskal-Wallis Test
■ Test Statistic
 12 k
Ri2 
W = ∑  − 3(nT + 1)
 nT (nT + 1) i =1 ni 
where: k = number of populations

ni = number of items in sample i
nT = Σni = total number of items in all samples
Ri = sum of the ranks for sample i

39
Kruskal-Wallis Test
■ When the populations are identical, the sampling

distribution of the test statistic W can be approximated
by a chi-square distribution with k – 1 degrees of
freedom.
■ This approximation is acceptable if each of the sample
sizes ni is > 5.
■ The rejection rule is: Reject H0 if p-value < α

40
Rank Correlation
■ The Pearson correlation coefficient, r, is a measure of

the linear association between two variables for
which interval or ratio data are available.
■ The Spearman rank-correlation coefficient, rs , is a
measure of association between two variables when
only ordinal data are available.
■ Values of rs can range from –1.0 to +1.0, where
• values near 1.0 indicate a strong positive
association between the rankings, and
• values near -1.0 indicate a strong negative
association between the rankings.

41
Rank Correlation
■ Spearman Rank-Correlation Coefficient, rs
6∑ di2
rs = 1 −
n( n2 − 1)
where: n = number of items being ranked

xi = rank of item i with respect to one variable
yi = rank of item i with respect to a second variable
di = xi - yi

42
Test for Significant Rank Correlation
■ We may want to use sample results to make an

inference about the population rank correlation ps.
■ To do so, we must test the hypotheses:
H 0 : ps = 0 (No rank correlation exists)

H a : ps ≠ 0 (Rank correlation exists)

43
Rank Correlation
■ Sampling Distribution of rs when ps = 0

• Mean
µrs = 0
• Standard Deviation
1
σ rs =
n−1
• Distribution Form
Approximately normal, provided n > 10

44
Rank Correlation
■ Example: Crennor Investors

Crennor Investors provides
a portfolio management service
for its clients. Two of Crennor’s
analysts ranked ten investments
as shown on the next slide. Use
rank correlation, with α = .10, to
comment on the agreement of the two analysts’
rankings.

45
Rank Correlation
■ Example: Crennor Investors

• Analysts’ Rankings
Investment A B C D E F G H I J
Analyst #1 1 4 9 8 6 3 5 7 2 10
Analyst #2 1 5 6 2 9 7 3 10 4 8
• Hypotheses
H 0 : ps = 0 (No rank correlation exists)
H a : ps ≠ 0 (Rank correlation exists)

46
Rank Correlation
Analyst #1 Analyst #2
Investment Ranking Ranking Differ. (Differ.)2
A 1 1 0 0
B 4 5 -1 1
C 9 6 3 9
D 8 2 6 36
E 6 9 -3 9
F 3 7 -4 16
G 5 3 2 4
H 7 10 -3 9
I 2 4 -2 4
J 10 8 2 4
Sum = 92
47
Rank Correlation
 Sampling Distribution of rs
Assuming No Rank Correlation
1
σ rs = = .333
10 − 1
rs
µr = 0

48
Rank Correlation
■ Rejection Rule
With .10 level of significance:
■ Test Statistic
6∑ di2 6(92)
rs = 1 − =1− = 0.4424
n(n 2 − 1) 10(100 − 1)
z = (rs - µr )/σr = (.4424 - 0)/.3333 = 1.33
■ p-Value
p-Value = 2(.5000 - .4082) = .1836

49
Rank Correlation
■ Conclusion
Do no reject H0. The p-value > α. There is not a
significant rank correlation. The two analysts are not
showing agreement in their ranking of the risk
associated with the different investments.

50
End of Chapter 19

51

QM CH 12 Non Parametric Methods

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Slides Prepared by

© 2005 Thomson/South-Western Slide

© 2005 Thomson/South-Western Slide

■ Most of the statistical methods referred to as parametric

© 2005 Thomson/South-Western Slide

■ In general, for a statistical method to be classified as

© 2005 Thomson/South-Western Slide

■ A common application of the sign test involves using

© 2005 Thomson/South-Western Slide

■ The small-sample case for the sign test should be

© 2005 Thomson/South-Western Slide

■ Using H0: p = .5 and n > 20, the sampling distribution

■ The test statistic is: x−µ

■ H0 is rejected if the p-value < level of significance, α.

© 2005 Thomson/South-Western Slide

■ Example: Ketchup Taste Test

© 2005 Thomson/South-Western Slide

■ Example: Ketchup Taste Test

1 preferred Brand A Ketchup

© 2005 Thomson/South-Western Slide

© 2005 Thomson/South-Western Slide

■ Sampling Distribution for Number of Plus Signs A B

σ = .25n = .25(30) = 2.74

© 2005 Thomson/South-Western Slide

© 2005 Thomson/South-Western Slide

© 2005 Thomson/South-Western Slide

■ We can apply the sign test by:

© 2005 Thomson/South-Western Slide

■ Example: Trim Fitness Center

In a sample of 40 female members, 25 are older

© 2005 Thomson/South-Western Slide

■ Mean and Standard Deviation

© 2005 Thomson/South-Western Slide

© 2005 Thomson/South-Western Slide

■ This test is the nonparametric alternative to the

© 2005 Thomson/South-Western Slide

■ Example: Express Deliveries

© 2005 Thomson/South-Western Slide

District Office OverNight NiteFlite

© 2005 Thomson/South-Western Slide

■ Preliminary Steps of the Test

© 2005 Thomson/South-Western Slide

District Office Differ. |Diff.| Rank Sign. Rank

© 2005 Thomson/South-Western Slide

© 2005 Thomson/South-Western Slide

■ Sampling Distribution of T for Identical Populations

n(n + 1)(2 n + 1) 10(11)(21)

© 2005 Thomson/South-Western Slide

© 2005 Thomson/South-Western Slide

© 2005 Thomson/South-Western Slide

■ This test is another nonparametric method for

© 2005 Thomson/South-Western Slide

■ Instead of testing for the difference between the

H0: The two populations are identical

© 2005 Thomson/South-Western Slide

■ Example: Westin Freezers

© 2005 Thomson/South-Western Slide

Westin Freezers Easton Freezers

© 2005 Thomson/South-Western Slide

© 2005 Thomson/South-Western Slide

© 2005 Thomson/South-Western Slide

© 2005 Thomson/South-Western Slide