Hypothesis Testing for

Categorical Data
(Chi-Square Test)

Hypothesis Testing for Categorical Data (Chi-Square Test) 1

 Learning Objectives

Upon completion of this chapter, you will be able to:

 Understand the concept of chi-square statistic and chi-square

distribution
 Understand the concept of chi-square goodness-of-fit test
 Understand the concept of chi-square test of independence:
two-way contingency analysis
 Understand the concept of chi-square test for population
variance and chi-square test of homogeneity

Hypothesis Testing for Categorical Data (Chi-Square Test) 2

Defining Chi-Square Test Statistic
 Some researchers place the chi-square technique in the
category of non-parametric tests for testing of the hypothesis.
 Chi-square distribution is the family of curves with each
distribution defined by the degree of freedom associated to it. In
fact chi-square is a continuous probability distribution with
range 0 to ∞.

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Figure 13.1: Chi-Square distribution with 1, 5, and 10 degrees of freedom

Hypothesis Testing for Categorical Data (Chi-Square Test) 4

Figure 13.2: Acceptance or rejection region in a Chi-Square test

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 Conditions for Applying the
Chi-Square test
 In a contingency table, an expected frequency of less than 5 in a
cell is less than the frequency required to apply the chi-square
test. In such cases, we need to “pool” the frequencies which are
less than 5 with the preceding or succeeding frequency, so that
the sum of the frequency will be 5 or more.
 The sample should consist of at least 50 observations and
should be drawn randomly from the population. In addition, all
the individual observations in a sample should be independent
from each other.
 Data should not be presented in percentage or ratio form,
rather they should be expressed in original units.

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 Chi-Square Goodness-of-Fit Test
Chi-square test provides a platform that can be used to ascertain
whether theoretical probability distributions coincide with empirical
sample distributions.
Example 13.1: A company is concerned about the increasing violent
altercations between its employees. The number of violent incidents
recorded by the management during six randomly selected months is
given in Table 13.2.

Hypothesis Testing for Categorical Data (Chi-Square Test) 7

Computation of Expected Frequencies and
Chi-square Statistic for Example 13.1

Solved Examples\Excel\Ex 13.1.xls

Hypothesis Testing for Categorical Data (Chi-Square Test) 8

Chi-square Test of Independence:
Two-way Contingency Analysis
 When observations are classified on the basis of two variables
and arranged in a table, the resulting table is referred to as a
contingency table. Chi-square test of independence uses this
contingency table for determining independence of two
variables; this is why this test is sometimes referred to as
contingency analysis.
 When we add the row or column totals, the grand total (N) is
obtained. This grand total is the sum of all the frequencies and
represents the sample size.

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The expected frequency of cell jk is

Expected frequency for any cell

Where RT is the row total, CT the column total, and N the total number of
frequencies

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Chi-Square Test Statistic

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 Example 13.2

The Vice President (Sales) of a garment company wants to determine

Example 13.2 whether sales of the company’s brand of jeans is
independent of age group. He has appointed a marketing researcher
for this purpose. This marketing researcher has taken a random
sample of 703 consumers who have purchased jeans. The researcher
conducted survey for three brands of the jeans, namely Brand 1,
Brand 2, and Brand 3.The researcher has also divided the age groups
into four categories: 15 to 25, 26 to 35, 36 to 45, and 46 to 55. The
observations of the researcher are provided in Table 13.6:

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 Table 13.6: Contingency table for Example 13.2

Determine whether brand preference is independent of age group. Use alpha=0.05.

Hypothesis Testing for Categorical Data (Chi-Square Test) 13

Table 13.7: Contingency table of the observed and expected
frequencies for Example 13.2

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 Table 13.8 : Computation of expected frequencies and chi-square
statistic for Example 13.2

Solved Examples\Minitab\Ex 13.2.MPJ

Hypothesis Testing for Categorical Data (Chi-Square Test) 15
Chi-square Test for
Population Variance

Hypothesis Testing for Categorical Data (Chi-Square Test) 16

 Example 13.3

A researcher draws a random sample of size 51 from the population.

The sample standard deviation is calculated as 15. Use alpha = 0.05
and test the hypothesis that the population standard deviation is 20.

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 Chi-square Test of Homogeneity

Chi-square test of homogeneity is used to determine whether

two or more independent variables are drawn from the same
population or from different populations.
In other words, we can say that chi-square test of homogeneity is
used to determine whether two or more populations are
homogenous with respect to some characteristic of interest.

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 Example 13.4

A television company has launched a new product with some

advanced features. The company wants to know the opinion of
consumers about this product with respect to four characteristics:
preferred brand with new features, did not prefer brand with new
features, preferred only a few new features, and indifferent. The
company has divided consumers into three groups—
executives/officers; businessmen, and private consultants. It has
taken a random sample of size 459 and obtained results presented in
Table 13.9.

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Table 13.9: Consumer responses for a new product with some advanced
features

Hypothesis Testing for Categorical Data (Chi-Square Test) 20

Table 13.10: Computation of expected frequencies for Example 13.4

Hypothesis Testing for Categorical Data (Chi-Square Test) 21

 Table 13.11: Computation of chi-square statistic for Example 13.4

Solved Examples\Excel\Ex 13.4.xls

Solved Examples\Minitab\EX 13.4.MPJ

Hypothesis Testing for Categorical Data (Chi-Square Test) 22