Variance Ratio Test

(F test)

Dr. T. T. Kachwala

1
Variance Ratio test (F test) – Introduction / Application

 In addition to means and proportions, there are many

managerial situations where we will be concerned about
the variability in a population. Examples:
1. Variation in marks obtained by students of Division A
& Division B
2. Variation in wages in male and female employees of
an organization
 The objective is to compare the variances of two
populations. However, rather than working at the
difference of the two sample variances, it turns out to be
more convenient if we look at their ratio
2
Variance Ratio Test – F Distribution

 Let n1 and n2 be the sample size of two samples drawn from two

different populations with variances σ12 s12   

and σ 2 2 s 2
2

 The objective of the test is to determine if the variances of one

sample are greater than that of the other.

 We use F distribution for testing the hypothesis for comparing the

variance of two population.

 F distribution is identified by a pair of Degree of Freedom. The

first number represents  for numerator of the F ratio and the
second number is  for the denominator of the F ratio .
3
 Variance Ratio Test – F Table

 For F critical value, we use F table in which columns

represent  of numerator and row represents  of
denominator.
 Separate table exists for each level of significance .
The diagram below is an F table distribution (skewed)
corresponding to  = 0.05

Rejection Region
(0.05)

Acceptance Region (0.95)

4
 Variance Ratio Test – Procedure (assuming s12 > s22 )

The following is the summary procedure for single (right) tailed test:
Step (i) H0 : σ12 = σ22 No Difference in Variance

H1 : σ12 > σ22 Variance of first sample is > Variance of second sample

Step (ii) α = 0.05, Fcritical = Fα , n , D (n = n1 -1, D = n2 -1)

F critical value = {from standard F table}

Step (iii) Calculate Fstatistic (assuming s12 > s22 )

12 s12
Fstatistic  
2 2
s2 2
 x12  x 22
s1 
2
(n1  1)
s2 
2
(n 2  1)
x1  X1 - X1 x 2  X2 - X2
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Variance Ratio Test – Procedure (assuming s12 > s22 )

Step (iv & v) : Decision Rule & Conclusion

Rejection Region
Acceptance Region (0.95) (0.05)

F Critical

If F statistic is in acceptance area If F statistic is in rejection area

Accept H0 : σ12 = σ22 Reject H0 : σ12 = σ22
Conclusion: There is no significant Accept H1 : σ12 > σ22
difference in the variances of the two Conclusion: Variances of the first
populations. population are greater than that of second
6
population
Variance Ratio Test – Procedure (Assuming s22 > s12 )

The table gives values that are appropriate only for upper (Right) tailed
test. The F table values are > 1. The single (Right) tailed procedure
assumes that Fstatistics is > 1
s1 2
i.e. F  (assumes s12 > s22 )
s22

However in cases where s22 > s12 then take s22 in the numerator of Fstatistics

The following is the suggested procedure (Assuming s22 > s12 )

Step 1. H0 : σ12 = σ22

H1 : σ22 > σ12 {right tailed test}

Step 2. Ftable = F0.05, n , D (n = n2 -1, D = n1 -1)

s22
Step3. F 
s12 7
Variance Ratio Test – Procedure (Assuming s22 > s12 )

Step (iv & v) : Decision Rule & Conclusion

Rejection Region
Acceptance Region (0.95) (0.05)

F Critical

If F statistic is in acceptance area If F statistic is in rejection area

Accept H0 : σ12 = σ22 Reject H0 : σ12 = σ22
Conclusion: There is no significant Accept H1 : σ22 > σ12
difference in the variances of the two Conclusion: Variances of the second
populations. population are greater than that of first
8
population
Thanks and Good Luck

Dr. T. T. Kachwala