INTRODUCTION TO HYPOTHESIS TESTING
10.1 HYPOTHESIS TESTING
Hypothesis testing is the operation of deciding whether or
not a data set obtained for a random sample supports or fails to
support a particular hypothesis. A hypothesis is an assertion or
conjecture about a parameter(s) of a population; it may also
concern with the type, nature of the population, or
distributional form of characteristics of interest.
STEPS IN HYPOTHESIS TESTING BY THE CRITICAL
VALUE APPROACH
1) Formulate the null hypothesis and the alternative
hypothesis.
2) Set the level of significance of size .
3) Select the appropriate test statistic.
4) Establish the critical region.
5) Compute the value of the test statistic.
6) Decision:
 Reject Ho if the value of test statistic belongs to the
critical region.
 Do not reject Ho if the value of the test statistics does
not belong to the critical region.
7) Conclusion.
STEPS IN HYPOTHESIS TESTING BY THE P-VALUE
APPROACH
A p-value is the smallest significance level at which a null
hypothesis may be rejected.
1) Formulate the null hypothesis and the alternative
hypothesis.
2) Set the level of significance of size .
3) Select the appropriate test statistic.
4) Compute the value of the test statistic.
5) Determine the p–value of the test statistic.
6) Decision:
 Reject Ho if the p–value is less than .
 Do not reject Ho if the p–value is greater (or equal) than
.
7) Conclusion.
10.2 TYPES OF HYPOTHESES
A. Null hypothesis, H 0 – represents a theory that has been put
forward, either because it is believed to be true or because it is
used as a basis for argument. This assertion is held as true until
there is sufficient statistical evidence to conclude otherwise. It
states that there is no difference between a parameter(s) and a
specific value.
B. Alternative hypothesis, H A or H 1 – an assertion of all
situations not covered by the null hypothesis. It states that
there is a precise difference between a parameter(s) and a
specific value.
EXAMPLES:
State the null hypothesis and the alternative hypothesis to be
used. (Note: The equal sign must be in the null hypothesis,
regardless of the statement.)
1. New software is being integrated into the teaching of a
course with the hope that it will help to improve the overall
average score for this course. The historical average score for
this course is 70.
2. A real estate agent claims that the average price for homes
in a certain subdivision is P1.8M. You believe that the average
price is lower. You plan to test his claim by taking a random
sample of the prices of the homes in the subdivision; formulate
the set of hypotheses.
3. An advertisement on the TV claims that a certain brand of
tire has an average lifetime of 50,000 miles. Suppose you plan
to test this claim by taking a sample of tires and putting them
on test. What is the correct set of hypotheses to set up?
10.3 POSSIBLE OUTCOMES OF A HYPOTHESIS TEST
Statistical True state of the null hypothesis
Decision Ho is true Ho is false
ERROR Correct
Reject Ho
Type I decision
Correct ERROR
Do not reject Ho
decision Type II
- probability of committing a type I error
- area of the critical region
- also called the level of significance
- probability of committing a type II error
Notes:
 A type I error will be committed when the true null
hypothesis is rejected.
 A type II error is committed when a false null
hypothesis is not rejected.
10.4 TYPES OF TEST
A. One tailed test: A test of any statistical hypothesis where
the alternative hypothesis is one-sided.
( H A : > or <)
B. Two tailed test: A test of any statistical hypothesis where
the alternative hypothesis is two-sided. ( H A :≠)
10.5 DEFINITION OF SOME TERMS
 Test statistic – a sample statistic computed from the data.
The value of the test statistic is used in determining
whether or not the null hypothesis is rejected.
 Critical or rejection region – a range of test statistic
values for which the null hypothesis should be rejected.
This range of values will indicate that there is a significant
or large enough difference between the hypothesized
parameter value and the corresponding point estimate for
the parameter.
 Critical value –first value in the critical region. The set of
values that are not in the critical region is called the region
of acceptance (noncritical or non-rejection).
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