Hypothesis Testing

Slide 1
 Overview
When a researcher in any field sets out to
test a new theory, he first sets or formulates a
hypothesis or claim, which he believes to be true.
In statistics, a hypothesis is a claim or
statement about a parameter of a population.
A hypothesis test (or test of significance) is
a standard procedure for testing a claim about a
parameter of a population.

Slide 2
 Key Concept
This section presents individual components of a
hypothesis test, and the following sections use
those components in comprehensive procedures.
The role of the following should be understood:
 null hypothesis
 alternative hypothesis
 test statistic
 critical region
 significance level
 critical value
 Type I and II error Slide 3
 Formal Testing Procedure
A hypothesis procedure involves the following six steps:
1. Set up the null hypothesis and the alternative hypothesis,
and express them both in symbolic form. The alternative
hypothesis decides whether the test is one tailed or two
tailed
2. Specify a level of significance(α)
3. Given a claim and sample data, calculate the value of the
test statistic.
4. Identify the critical values and critical region using z-table
5. State a rule to reject the null hypothesis
6. State the conclusion of a hypothesis test in simple, non-
technical terms.

Slide 4
 Components of a
Formal Hypothesis Test

Slide 5
 Null Hypothesis:
H0
 The null hypothesis (denoted by H0) is
a statement that the value of a
population parameter (such as
proportion, mean, or standard
deviation) is equal to some claimed
value.
 We test the null hypothesis directly.
 Either reject H0 or fail to reject H0.

Slide 6
 Alternative Hypothesis:
H1
 The alternative hypothesis (denoted
by H1 or Ha or HA) is the statement that
is desired to be concluded about the
population parameter.
 The symbolic form of the alternative
hypothesis must use one of these
symbols: , <, >.

Slide 7
 Tailed Test
One Tailed Test: A one tailed of hypothesis is
one in which the alternative hypothesis is in
one direction ie less or greater is called one
tailed test. E.g, H1 :u > 49 or H1 :u < 49
Two Tailed Test: A hypothesis in which an
alternative hypothesis does not specify its
direction is called two sided or two tailed test.
Such an alternative is written with the symbol ≠

Slide 8
 Test Statistic

A random variable whose value is calculated

from the sample data and is used in making the
decision “fail to reject H0” or “reject H0”
The numerically values of of the test statistic
for which the null hypothesis is rejected are called
the critical values of the test and these values
constitute a region called critical region or
rejection region of the test.

Slide 9
Test Statistic - Formulas

z= x - µx Test statistic
 for mean
n

Slide 10
 Critical Region

The critical region (or rejection region) is the

set of all values of the test statistic that
cause us to reject the null hypothesis

Slide 11
 Significance Level

The significance level (denoted by ) is the

probability that the test statistic will fall in the
critical region when the null hypothesis is
actually true. This is the same  introduced
previous section . Common choices for  are
0.05, 0.01, and 0.10.

Slide 12
 Rejection Rule
Rejection Rule: If the absolute of test statistic computed
using sample data exceeds the absolute critical value of the
test, the null hypothesis is rejected. When the null hypothesis
is rejected the test is called significant and when the null
hypothesis is not rejected the test is called insignificant.

Slide 13
 Two-tailed, Right-tailed,
Left-tailed Tests

The tails in a distribution are the extreme

regions bounded by critical values.

Slide 14
 Two-tailed Test
H0 : =  is divided equally between
the two tails of the critical
H1 :  region

Means less than or greater than

Slide 15
Right-tailed Test
H0: =
H1: >
Points Right

Slide 16
 Left-tailed Test
H0 : =
H1 : <
Points Left

Slide 17
 Conclusions
in Hypothesis Testing
We always test the null hypothesis. The initial
conclusion will always be one of the following:

1. Reject the null hypothesis.

2. Fail to reject the null hypothesis.

Reject or do not reject the null hypothesis on the

basis of above rejection rule. The test will be
significant if null hypothesis is rejected otherwise
the test will be insignificant.

Slide 18
 Type I Error
 A Type I error is the mistake of
rejecting the null hypothesis when it
is true.

 The symbol (alpha) is used to

represent the probability of a type I
error.

Slide 19
 Type II Error

 A Type II error is the mistake of failing

to reject the null hypothesis when it is
false.

 The symbol  (beta) is used to

represent the probability of a type II
error.

Slide 20