Manav Rachna University.

DEPARTMENT OF MANAGEMENT
AND COMMERCE
Semester - II
Research Methodology
Unit III
HYPOTHESIS TESTING
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 HYPOTHESIS
A hypothesis is a preliminary or
tentative explanation by the researcher of
what the researcher considers the outcome
of an investigation will be.
In its simplest form, the hypothesis is a guess
Hypothesis Testing: a well defined procedure
which helps us to decide objectively whether
to accept or reject hypothesis based on the
information available from the sample

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 BASIC CONCEPTS
POPULATION: collection of all elements under
statistical investigation about which we are
trying to draw some conclusion
PARAMETER: descriptive measure of some
characteristics of the population
Parameters are generally denoted by Greek
letters: Population mean (); Population variance
(2) and Population standard deviation ()
STATISTIC: descriptive measure from a sample
Statistic are generally represented by Roman
letters like sample mean ( x ) sample variance
(s2) and sample deviation (s)
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 HYPOTHESIS TESTING
The process of Hypothesis testing
comprises
a.Hypothesis: Making of
a statement/claim about
the population,
b.Sampling from the population and analyzing
the sample data, and
c.Determining whether the differences
between what is observed (i.e. sample) and
the statement made (i.e. hypothesis) could
have been due to chance alone and hence
insignificant or they are significant and
casting a doubt on the statement made.
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 HYPOTHESIS TESTING
The following steps are involved in
hypothesis testing
1. Formulate null hypothesis Ho and the
alternate hypothesis H1
2. Choose the level of significance
3. Select an appropriate statistical
technique and a corresponding test
statistic
4. Establish the decision rule.
5. Perform computations.
6. Draw conclusion
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1: FORMULATE HYPOTHESIS
The null hypothesis is always the one
to be tested for possible rejection.
The alternate hypothesis , which is
opposite of null hypothesis, is a statement
expressing relationship between two
variables or indicating between groups
If we reject the null hypothesis, we
conclude that there is enough evidence to
infer that the alternative hypothesis is
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The alternative
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DEVELOPING HYPOTHESIS
1. Ho is a hypothesis of no difference or no change
and is set on the presumption that no significant
difference exists between the sample result and
population parameter hypothesised.
2. The research hypothesis should be stated as
alternative hypothesis. The Ho should be so
formed that its rejection supports research
conclusion. Usually one tailed test.
3. Manufacturers claim is true unless the sample
evidence is contradictory. Usually one tailed test.
4. In decision making situations, Manufacturers claim
is true unless the sample evidence is contradictory.
However, it is usually a two tailed test.
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 Null hypothesis: H0: Defendant is innocent
Alternative hypothesis: HA: Defendant is guilty
(burden of proof) that HA is true

1. Present Evidence i.e. Collect data

2. Judge the evidence: Could these data plausibly
have happened by chance if the null hypothesis
were true?
Yes: Fail to reject H0

No: Reject H0

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 AN EXAMPLE
A study claims that the mean income
of the senior executives in the
manufacturing sector in an industrial
state is Rs 625,000 per annum. To
test this claim, it is decided to take a
sample of 200 executives and obtain
their mean income. Set up the
appropriate hypotheses.
Ho: = 625000; H1: 625000

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 AN EXAMPLE
A model of car attains an average
mileage of 24 km/lt. The product
research team develops a new
engine specifically to increase
mileage. Develop Ho and H1
hypothesis.
HA: > 24 km; Ho: 24 km

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 DIRECTIONAL AND NON-DIRCTIONAL
HYPOTHESIS
Directional Hypothesis: If, in stating a relational
ship between two variables or comparing two
groups, terms such as positive, negative, more
than, less than, are like are used, then these
hypothesis are Directional because the
direction of relationship between the variables
is indicated. E.g.
The greater the stress experiences in the job,
the lower the job satisfaction in the employees
Women are more motivated than men.

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 NON DIRECTIONAL
HYPOTHESES
Nondirectional hypotheses are those that do
postulate a relationship or difference, but
offer no indication of the direction of these
relationship or differences
Though no directional hypotheses may be
conjectured that there could be a significant
relationship between two variables, we may
not be able to say whether the relationship
would be positive or negative. E.g
There is a relationship between age and job
satisfaction
There is a difference between work ethic
values among American and Asian
employees.
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TWO TAILED TEST

Critical
HO Acceptance Region
Region ; (1 )

/
/2
2

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ONE TAILED TEST

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 II. CHOOSE LEVEL OF SIGNIFICANCE
When we test the hypotheses, we can never be
100% certain of our conclusions.
We can only be confident to a certain level
Level of significance ()refers to the probability of
rejecting null hypothesis when it is true
Level of significance is complement of the level of
confidence, so that if level of confidence is 95%,
level of significance is 5% or simple = 0.05
Typically we construct our test so that we will be
95% certain that the conclusion we draw is a
correct
This is called a 95% confidence level, or a 5%
significance level.
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LEVEL OF SIGNIFICANCE
Whenever we draw inferences about a
population, there is a risk that incorrect
conclusion will be reached.
Two types of errors can occur:
- Type I Error (denoted by ) occurs when
the sample result leads to the rejection of
null hypothesis when it is true
- Type II Error (denoted by )occurs when
based on sample result, we accept the
null hypothesis is accepted when it is not
true.
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 TYPE I AND TYPE II
ERRORS
Population Condition

H0 True H0 False
Conclusion

Correct
Accept H0 Type II Error
Decision

Correct
Reject H0 Type I Error
Decision

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III. SELECT AN APPROPRIATE TEST
Testing of hypothesis is done by means of
computing some statistic and comparing its
value with certain standard value, called
critical value, to determine whether null
hypothesis may be rejected
Several tests such as z, t, F, 2 are available.
When the sample is large (i.e. 30), z statistic
is used for testing hypothesis and is defined as
z = x - where SE = / n
SE = population mean
= population standard deviation
x = sample mean n = sample size
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 ESTABLISHING A
DECISION RULE
If the computed value of the test statistic
is more extreme than its critical value/s,
then reject H0, else accept H1.
The critical values are obtained having
reference to appropriate area tables
relating to the concerned test statistic.
The critical value depends on several
factors including the statistic being used,
the level of significance and whether the
test is two- tailed or one-tailed.
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 SUMMARY OF CERTAIN
CRITICAL VALUES FOR SAMPLE
STATISTIC Z
LEVEL OF SIGNIFICANCE
Rejection
Area = =
=
0.05 0.01
0.10

One Tailed
Test
1.28 1.65 2.33

Two Tailed
Test
1.65 1.96 2.58
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 DRAW CONCLUSION
The final step in the hypothesis testing
process calls for drawing conclusion from the
test.
This is done on the basis of the comparison
of the calculated value of the test statistic
with the critical value.
The null hypothesis stands rejected if the
calculated value of the test statistic is more
extreme than the critical value.
This is true both for two-tailed and one- tailed
tests.
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TEST OF HYPOTHESIS (LARGE
SAMPLE)
Large sample = sample size (n) 30

ONE SAMPLE TWO SAMPLE

TEST OF TEST OF
HYPOTHESIS HYPOTHESIS

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LARGE SAMPLE = SAMPLE SIZE
30
ONE SAMPLE TEST OF HYPOTHESIS
When the sample is large (i.e. 30), z statistic is
used for testing hypothesis and is defined as
z = x - where SE = / n or s/ n
SE = population standard deviation
n = sample size s: sample standard deviation
x = Value of sample statistic
= Value of hypothesized population parameter
Compare value of z with critical value & take
accept/reject decision.

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 HYPOTHESIS TESTING FOR SINGLE
POPULATION PROPORTION
Sometimes instead of testing a hypothesis pertaining to a
population mean, a population proportion (a fraction, ratio
or percentage) p of values that indicates the part of the
population or sample having a particular attribute/quality
of interest is considered. For this, a random sample of
size n is selected to compute the proportion of elements
having a particular attribute of interest (also called
success) in it as: Number of successes in the sample x
p= =
Sample size n
The value of this statistic is compared with a
hypothesized population proportion so as to arrive at a
conclusion about the hypothesis.
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HYPOTHESIS TESTING FOR SINGLE
POPULATION PROPORTION

z= p ;
SE

SE = (1 )
n

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 HYPOTHESIS TESTING FOR A BINOMIAL
PROPORTION
Instead of examining the hypothesis regarding
proportion of elements having the same trait (called
success) in a sample as discussed in the previous
section, we could examine the number of successes in
a sample. The z-test statistic for determining the
magnitude of the difference between the number of
successes in a sample and the hypothesized (expected)
number of successes
z= in the Expected
Sample estimate population
value is
= given by
x - np
Standard error of estimate npq

Recalling from previous discussion that although sampling

distribution of the number of successes in the
npq sample follows
a binomial distribution having its mean m = np and standard
deviation , the normal distribution provides a good
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approximation to the binomial distribution provided the
 TWO SAMPLE TEST OF
HYPOTHESIS
The analysis is of two populations
from each of which a sample is taken.
Accordingly, there are two
independent sets of data.
To test whether the two samples
could have been drawn from the
populations that have equal
parameters.

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 HYPOTHESIS TESTING FOR
DIFFERENCE BETWEEN TWO
POPULATION MEANS
Ho = 1 = 2
Hence 1 - 2 = 0; Hence
Z= (x1 x2)
+
n1 n2 OR

Z= (x1 x2)
s1 + s
n1 n2

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TWO SAMPLE TESTS OF HYPOTHESIS FOR
PROPORTIONS
Deals with cases in which each element sampled can
be classified into one of the two categories success
or failure.
Two independent samples are drawn from two
populations, proportions of successes in each sample
p1 and p2 respectively are calculated.
It is hypothesized that the two population proportions
of successes 1 and 2 respectively are equal.
This test involves examining whether the difference
between sample proportions p1 p2 is significantly
different from the hypothesized difference of 0.
The z-statistic is used for this hypothesis testing.

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 HYPOTHESIS TESTING FOR
TWO POPULATION
PROPORTION
p and p = sample
1 2
z = (p1 p2) (1 proportions
2) obtained
SE in large sample of
size n1 and n2 drawn
from respective
SE = p (1-p) 1 + 1populations having
n1 proportions
n2 1 and 2.
We can test
hypothesis that there
p = n1p1 + n2p2 is no difference
n1 + n2 between population
proportion, i.e. Ho =
1 = 2
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 T-TEST
In case of small random sample (i.e. n<30) and
population standard deviation is not known, t test
can be applied.
t- statistic is defined as degree of freedom equal
to n 1
Degrees of freedom: No. of values that we can
choose freely.
APPLICATIONS OF T DISTRIBUTION
Test of hypothesis about single population mean
Test of hypothesis about difference between two
means with independent samples
Test of hypothesis about difference between two
means with dependent samples
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 SINGLE POPULATION
MEAN
When Standard deviation is unknown
and sample size is small
t=x-
s/ n
t- statistic is defined as degree of
freedom equal to n 1 and
s = (x x)2 = d2 - (d)2
n1 n-1 n(n-1)
SMALL RANDOM SAMPLE
Degree of freedom is the total number of
observations minus the number of
independent constraints imposed on the
observations.
Test of hypothesis about the difference
between two means:
- Case of equal variance (std. deviation not
given)
- Case of unequal variance
Test of hypothesis about the difference
between two means with dependent samples
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 TWO SAMPLE TEST OF
HYPOTHESIS
Dependent Samples (or Paired samples)
We may consider performance of a group of workers
before and after training as an illustration of paired or
dependent samples.
t=d n d = d s= d 2 - (d)2
s n n1 n(n 1)
Where n = no. of paired observations, df = n 1
s = sample Std deviation of the distribution of the
difference between the paired observation.
d = difference between the observations
d = mean of differences

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HYPOTHESIS TESTS FOR 1
2
Population means, independent samples

1 and 2 known Use a z test statistic

Use s to estimate
1 and 2 unknown, unknown , approximate
n1 and n2 30 with a z test statistic

1 and 2 unknown, Use s to estimate

n1 or n2 < 30 unknown , use a t test
statistic and pooled
standard deviation