R11 Hypothesis Testing 01

Reading 11 - Hypothesis Testing

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1. Hypothesis A statement about the value of some 16. #6 Make the Claiming that your test statistic is
effect size or parameter of one or statistical decision greater than your critical value is which
more populations step of hypothesis testing?
2. Hypothesis Testing Evaluating accuracy of statement 17. Telling if it is Step #7 Making the economic decision
regarding population parameter or economically involves?
effect size given sample information significant
3. Steps in Hypothesis 1. State the Hypothesis 18. P-Value Smallest level of significant which H0
Testing 2. Identify appropriate test statistic can be rejected
and its probability distribution
19. Gets The smaller the P value, what happens
3. specify the significance level
Stronger/More to your credibility/evidence?
4. State the decision rule
Reliable
5. collect data and calculate the test
statistic 20. When do you use T-Test used when population stdev
6. make the statistical decision a T-Test? UNKNOWN (usually the case) but large
7. making the economic or n
investment decision
OR
4. Null Hypothesis (H0) Statement we are testing
5. Alternative The statement we are trying to
Hypothesis validate - n<30
6. Test Statistic Calculated quantity based on 21. n-1 How do you calculate degrees of
sample whose value is basis for freedom for standard t-tesT?
accept/reject of H0
22. Degrees of How free your sample values are up
7. What is the standard (x_ - Uo) / (s (sqrt(n)) freedom until your last one
formula for Test
23. When large n and When do you use a z-test?
Statistic?
unknown
8. Power of a test 1-Beta population stdev
9. When does Power When you reject a false null
OR
Ocur? hypothesis
10. Type 1 Error is alpha known stdev
represented by
24. 1.645 2-Tailed Tests:
11. Alpha occurs when Reject a true null
12. Confidence interval (1- alpha) Critical Value for 90% confidence
on significance interval
diagram is 25. 1.96 2-Tailed Tests:
represented as
13. Type 1 Error is alpha Critical Value for 95% CI
represented by ___ on 26. 2.58 2-Tailed TestS:
significance diagram
14. True True or False: Critical Value for 99% CI
27. 1.28 1-Tailed Test:
Rducing P(Type 1 Error) involves
reducing alpha, but doing so Critical Value for 90% CI
increased the P(Type II Error)
28. 1.65 1-Tailed Test:
15. #4: State The Selecting the right tail test, left tail
Decision Rule test, or two tailed test is which step Critical Value for 95% CI
of hypothesis testing?
 R11 Hypothesis Testing 02

29. 2.33 1-Tailed Test: 36. Same as t-test How to calculate test statistic and
critical value for Mean Differences
Critical Value for 99% confidence CV = t(alpha), n-1
interval
37. Sigma^2 > 0, Variance Test Properties
30. When you have When do you use differences between Cannot be
two means? negative
INDEPENDENT
38. See Picture
SAMPLES with
differing means,
CV: X^2, 1-alpha ,
variance could
n-1
either = or NOT
EQUAL
31. Pool together What do you do when variances are
variances and use EQUAL in "differences between means"
long ass formula. How to find test statistic and CV for Chi
Formula for S^2 is Test
different
39. When you have a When do you use an F-TesT?
test for 2
-critical value
variances that are
stays same:
INDEPENDENT
t(alpha/2), df
RANDOM
32. Long ass formula SAMPLES
but use modified
degrees of H0 = SIGMA 1 =
freedom formula SIGMA 2
--> SIGMA 1 /
s^2 will not be SIGMA 2 = 1
pooled together
What do you do when variances are 40. See Picture
NOT EQUAL in "differences between
means" CV:

33. Paired What is the test where

F (n1 - 1, n2 - 1)
Comparison Test Formula for F-Test Statistic and CV
H0: Ud = Ud0
n1 = numerator
Ha: Ud =/ Ud0
n2 = denominator
34. Mean Differences In what situation do you use a paired
41. The larger s or s^2 How do you decide which sample is
& DEPENDENT comparison test
is numerator numerator (s1)
SAMPLING
42. Testing Testing strength of a linear relationship
EX) Dow 10 Correlations between 2 variables (i.e. correlation)
Returns out of 43. Test statistic - see
Dow 30 pic
35. same as general
but just take CV = t alpha, n-2
mean of the
differences, and DF = n-2
then (d - variance of mean differences formula
d__)^2/(n-1)

Formula for testing correlation (test -

statistic) and CV
 R11 Hypothesis Testing 03

44. - Not concerned with a parameter Properties of Non Parametric Tests

- Distribution-free
45. - When data doesn't meet distributional assumptions When to use Non-Parametric Test
- when data are given in ranks
- when hypothesis does not concern parameter