HYPOTHESIS TESTING

HYPOTHESIS
 It is an educated guess that can be tested
 A statement that describes the population parameter
 It is a tentative explanation, a claim, or assertion about people, objects, or events.

Types of Hypothesis
1. Null Hypothesis
 Denoted by H 0 is a statement that there is no difference between a parameter and a specific
value, or that there is no difference between the two parameters.
2. Alternative Hypothesis
 Denoted by H a ¿ H 1is a statement that there is a difference between a parameter and a specific
value or that there is a difference between tow parameters.
 An opposing statement believed to be true whenever the null hypothesis is rejected.

Types Of Error
 Type I Error: This type of error rejects the null hypothesis when in fact it is true. Type I error is also
known as alpha α error.
 Type II Error: this type of error fails to reject the null hypothesis when in fact it is false. Type II error
is also known as beta β error.

Fact
Decision
H 0 is true H 0 is false
Accept H 0 Correct decision Type II error
Reject H 0 Type I error Correct decision

Level of Significance (α )
 The significance level of a hypothesis is defined as the probability of committing a type I error. This is
the probability of rejecting a true null hypothesis.

TYPES OF TEST
1. One-Tailed Test
 It is a hypothesis test where the rejection region lies at only one tail of the distribution.
 It is used when the alternative hypothesis is directional. It means that the value is either greater than
or less than the other measure.
 Could be classified as left-tailed or right-tailed.
2. Two-Tailed Test
 It is a hypothesis test where the rejection region lies at both end tails of the distribution, one on the
left and one on the right. The alpha level is also divided into two equal parts.

Type of Test
Level of Significance One-Tailed test Two-Tailed test
Both Left- and Right-
Left-Tailed Right-Tailed
Tailed
α = 0.05 Z < - 1.645 Z > 1.645 Z > 1.96 or Z < - 1.96
α = 0.01 Z < - 2.33 Z > 2.33 Z > 2.575 or Z < - 2.575
α = 0.10 Z < - 1.28 Z > 1.28 Z > 1.645 or Z < - 1.645

Key Terms

1. Test Statistic – used as a basis for deciding whether the null hypothesis should be rejected.
2. Rejection Region – this is the set of values of the test statistic that leads to rejection of the null
hypothesis.
3. Non-Rejection Region – this is the set of values of the test statistic that leads to acceptance of the null
hypothesis.
4. Critical Value – this is the set of values of the test statistic that separates the rejection and non-rejection
regions.