Hypothesis and Hypothesis Testing

HYPOTHESIS A statement about the value of a population parameter developed for the purpose of testing.

HYPOTHESIS TESTING A procedure based on sample evidence and probability theory to determine whether
the hypothesis is a reasonable statement.

TEST STATISTIC A value, determined from sample information, used to determine whether to reject the null
hypothesis.

CRITICAL VALUE The dividing point between the region where the null hypothesis is rejected and the region
where it is not rejected.
Important Things to Remember about H0 and H1
 H0: null hypothesis and H1: alternate
hypothesis
 H0 and H1 are mutually exclusive and Keywords
Inequality
Part of:
collectively exhaustive Symbol
 H0 is always presumed to be true
 H1 is the research hypothesis Larger (or more) than > H1
 A random sample (n) is used to “reject H0”
Smaller (or less) < H1
 If we conclude 'do not reject H0', this does
not necessarily mean that the null No more than  H0
hypothesis is true, it only suggests that
there is not sufficient evidence to reject H0;
At least ≥ H0
rejecting the null hypothesis then, suggests
that the alternative hypothesis may be true.
Has increased > H1
 Equality is always part of H0 (e.g. “=” , “≥” ,
“≤”). Is there difference? ≠ H1
 “≠” “<” and “>” always part of H1
 In actual practice, the status quo is set up Has not changed = H0
as H0
 In problem solving, look for key words and Has “improved”, “is better See left H1
convert them into symbols. Some key than”. “is more effective” text
words include: “improved, better than, as
effective as, different from, has changed,
etc.”
Signs in the Tails of a Test
 Two-tailed Test
Two-tailed tests -
the rejection
region is in both Rejection Rejection
tails of the Region Region
Acceptance
distribution
Region

One-tailed tests
- the rejection One-tailed Test
region is in only
on one tail of Rejection
the distribution Region Acceptance
Region
 Types of Errors
H 0 is true H 0 is false

Reject H 0 Type I error Correct

P(Type I)=  Decision

Correct Type II error

P(Type II)= 
Do not reject
H0 Decision
Type I Error -
Defined as the probability of rejecting the null hypothesis when it is actually true.
This is denoted by the Greek letter “”
Also known as the significance level of a test
Type II Error:
Defined as the probability of “accepting” the null hypothesis when it is actually false.
This is denoted by the Greek letter “β”
 Hypothesis Setups for Testing a Mean () or a
Proportion ()

MEAN

PROPORTION
 Steps in hypothesis testing

- Define Null hypothesis

- Define Alternative hypothesis
- Calculate Test statistic
- Determine Rejection region
- Compare Value of the test statistic with
Critical Value
- Conclusion
 Testing for a Population Mean with a
Known Population Standard Deviation- Example
EXAMPLE Step 4: Formulate the decision rule.
Jamestown Steel Company manufactures and Reject H0 if |Z| > Z/2
assembles desks and other office equipment . The
weekly production of the Model A325 desk at the Z  Z / 2
Fredonia Plant follows the normal probability
distribution with a mean of 200 and a standard X 
deviation of 16. Recently, new production  Z / 2
methods have been introduced and new  / n
employees hired. The mean number of desks 203.5  200
produced during last 50 weeks was 203.5. The VP  Z .01/ 2
of manufacturing would like to investigate whether 16 / 50
there has been a change in the weekly production 1.55 is not  2.58
of the Model A325 desk, at 1% level of
significance.

Step 1: State the null hypothesis and the

alternate hypothesis.
H0:  = 200
H1:  ≠ 200
(note: This is a 2-tail test, as the keyword
in the problem “has changed”)
Step 5: Make a decision and interpret the result.
Because 1.55 does not fall in the rejection region, H0 is not
Step 2: Select the level of significance. rejected. We conclude that the population mean is not
α = 0.01 as stated in the problem different from 200. So we would report to the vice
president of manufacturing that the sample evidence
does not show that the production rate at the plant has
Step 3: Select the test statistic.
Use Z-distribution since σ is known changed from 200 per week.
Testing for a Population Mean with a Known Population
Standard Deviation- Another Example
Suppose in the previous problem the vice Step 4: Formulate the decision rule.
president wants to know whether there Reject H0 if Z > Z
has been an increase in the number of
units assembled. To put it another way,
can we conclude, because of the Step 5: Make a decision and interpret the
improved production methods, that the result.
mean number of desks assembled in Because 1.55 does not fall in the rejection
the last 50 weeks was more than 200? region, H0 is not rejected. We conclude that
Recall: σ=16,  =200, α=.01 the average number of desks assembled in
the last 50 weeks is not more than 200
Step 1: State the null hypothesis and the
alternate hypothesis.
H0:  ≤ 200
H1:  > 200
(note: This is a 1-tail test as the
keyword in the problem “an increase”)

Step 2: Select the level of significance.

α = 0.01 as stated in the problem

Step 3: Select the test statistic.

Use Z-distribution since σ is known
 p-value in Hypothesis Testing
EAMPLE p-Value
Recall the last problem where the hypothesis
and decision rules were set up as:
 p-VALUE is the probability of
H0:  ≤ 200
observing a sample value as extreme
as, or more extreme than, the value H1:  > 200
observed, given that the null Reject H0 if Z > Z
hypothesis is true. where Z = 1.55 and Z =2.33

 In testing a hypothesis, we can also Reject H0 if p-value < 

compare the p-value to the 0.0606 is not < 0.01
significance level ().

 Decision rule using the p-value:

Reject null hypothesis, if p< α

Conclude: Fail to reject H0

 Interpreting the p-value
 Describing the p-value
– If the p-value is less than 1%, there is
overwhelming evidence that supports the
alternative hypothesis.
– If the p-value is between 1% and 5%, there is
a strong evidence that supports the
alternative hypothesis.
– If the p-value is between 5% and 10% there
is a weak evidence that supports the
alternative hypothesis.
– If the p-value exceeds 10%, there is no
evidence that supports the alternative
hypothesis.
The Power of Statistical Test
The power of a statistical test, given as 1 –  
= P (reject H0 when H0 is false), measures the
ability of the test to perform as required. This
1 –   is called the power of the function. This
means that greater the power of the function
the better would be the decision rule.
There are two types of tail test
1. One-tailed tests - the rejection region is in only
one tail of the distribution
2. Two-tailed tests - the rejection region is in both
tails of the distribution
Steps in Hypothesis Testing using SPSS
 State the null and alternative hypotheses
 Define the level of significance (α)
 Calculate the actual significance : p-
value
 Make decision : Reject null hypothesis, if
p≤ α, for 2-tail test; and
if p*≤ α, for 1-tail test.(p* is p/2 when p is
obtained from 2-tail test)
 Conclusion
Inference About a Population Mean When the
Population Standard Deviation Is Unknown or
When the Sample Size is Small
In practice, the population standard deviation will be
unknown.
Recall that when  is known we use the following
statistic to estimate and test a population mean
x
z
When  is unknown or when n the sample size is

small, we use its point estimator s, and the z-

statistic is replaced then by the t-statistic
 The t - Statistic

x 
t
s n

The t distribution is mound-shaped, The “degrees of freedom”,

(a function of the sample size)
and symmetrical around zero.
determine how spread the
distribution is (compared to the
d.f. = v2 normal distribution)
d.f. = v1
v 1 < v2
0
 Testing  when  is unknown
 Example
– In order to determine the number of workers
required to meet demand, the productivity of
newly hired trainees is studied.

– It is believed that trainees can process and

distribute more than 450 packages per hour
within one week of hiring.

– Can we conclude that this belief is correct,

based on productivity observation of 50
trainees (see file PROD.sav).
 Testing  when  is unknown
 Example – Solution
– The problem objective is to describe the
population of the number of packages
processed in one hour.
– H0: = 450
H1: > 450
– The t statistic
x 
t
s n d.f. = n - 1 = 49
 Testing  when  is unknown
 Solution continued (solving by hand)

– The rejection region is From the data we have

t > t,n – 1
t,n - 1 = t.05,49  x i  23,019  i  10,671,357, thus
x 2

 t.05,50 = 1.676. 23,019

x  460.38, and
50
  x
2

s2 
 x 2
i
 i
n  1507.55.
n 1
s  1507.55  38.83
 Testing  when  is unknown
Rejection region
• The test statistic is 1.676 1.89

x  460.38  450
t   1.89
s n 38.83 50

• Since 1.89 > 1.676 we reject the null

hypothesis in favor of the alternative.
• There is sufficient evidence to infer that the
mean productivity of trainees one week after
being hired is greater than 450 packages at .05
significance level.
 Solution using SPSS (use file PROD.sav)
One-Sample Statistics

N Mean Std. Deviation Std. Error Mean

Packages
50 460.38 38.827 5.491

One-Sample Test

Test Value = 450

95% Confidence Interval of
the Difference
Sig. (2- Mean
t df tailed) Difference Lower Upper
Packages
1.890 49 .065 10.380 -.65 21.41
 Inference About a Population
Proportion
 Statistic and sampling distribution
– the statistic used when making inference
about p is: xx
p̂p̂ where
where
nn
xxthe
the number
number ofof successes
successes..
nnsample
sample size
size. .

– Under certain conditions, [np > 5 and n(1-p) > 5],

p̂
is approximately normally distributed, with  = p
and 2 = p(1 - p)/n.
 Testing and Estimating the
Proportion
 Test statistic for p

p̂p̂pp
ZZ
pp((11pp))//nn
where np
where np55 and and nn((11pp))55
 Testing the Proportion
 Example 12.6
– A pharmaceutical company claimed that its
medicine was 80% effective in relieving
allergy. In a sample of 200 persons, who were
given medicine only 150 persons had relief.
Do you thank that the effectiveness is below
80%? Use 0.05 level of significance.
 Testing the Proportion
 Solution
– The problem objective is to test the
effectiveness of medicine.
– The data are nominal.
– The parameter to be tested is ‘p’.
– Success is defined as “having relief”.
– The hypotheses are:
H0: p = .8
H1: p < .8
Testing the Proportion
– Solution
• The rejection region is z < z = z.05 = -1.645.
• The sample proportion is pˆ  150 200  .75
• The value of the test statistic is

pˆ  p .75  .8
Z   1.786
p (1  p ) / n .8(1  .8) / 200
Since calculated z is less than critical value, we
reject null hypothesis and conclude that the
claim of the company that its medicine is 80%
effective is not justified.
T-Tests : When sample size is small
(<30) or When the Population
Standard Deviation Is Unknown
 Variable : Normal
 Types of t-tests:
One-sample t-test
Paired or dependent sample t-test
Independent samples t-test (Equal and

Unequal Variance)
One-sample t-test

H 0 :   0
H1 :    0
H1 :   0
H1 :   0
 Paired sample t-test

H0 : d  0
H1 : d  0
H1 : d  0
H1 : d  0
 Matched pairs

The mean of the population differences is D

that is 1   2   D

Test statistic:
xD   D
t
s D nD
Degree of freedom = nD  1
Independent sample t-test

H 0 : 1   2
H 1 : 1   2
H 1 : 1   2
H 1 : 1   2
The sampling process.

Population 1 Population2
Parameters: Parameters:
 1and 1 2
 2 and 22

Statistics: Statistics:
2
x1 ands1 2
x2 ands 2
Sample size: n1 Sample size: n2
If the two population standard deviations are
unknown, then we can estimate the standard
error of the difference between two means.

ˆ ˆ2 2

ˆ x1  x2   1 2

n1 n2
Test statistic:

z
 x1  x2 
ˆ2
ˆ 2
1
 2
n1 n2
If population variance unknown and the sample size
is small and the population variances are equal

Then we will use the weighted average called a

“ pooled estimate” of
2

1 1
 x1  x2  sp  
2

 n1 n2 
Where:

s 
2  n  1 s   n  1 s
1
2
1 2
2
2

n1  n2  2
p
Test statistic:

t
 x1  x2 
1 1
s   
2
p
 n1 n2 
Degree of freedom = n1  n2  2
 One way
Analysis of Variance ( ANOVA )

ANOVA is a technique used to test a

hypothesis concerning the means of three
or more populations.
Comparing Means of Three or More Populations
The F distribution is used for testing whether two or more sample means came from
the same or equal populations.
Assumptions:
– The sampled populations follow the normal distribution.
– The populations have equal standard deviations.
– The samples are randomly selected and are independent.

The Null Hypothesis is that the population means are the same. The Alternative
Hypothesis is that at least one of the means is different.

H0: µ1 = µ2 =…= µk
H1: The means are not all equal
Reject H0 if F > F,k-1,n-k
The test statistic used to test the hypothesis is
F statistic

Assumptions:

1. The random variable is normally

distributed.

2. The population variances are equal.

H 0 : 1   2  3  ........
H1 : Not all means are same
 ANOVA – Example (File Airlines.sav)
EXAMPLE
Recently a group of four major carriers
joined in hiring Brunner Marketing
Research, Inc., to survey recent
passengers regarding their level of
satisfaction with a recent flight. The
survey included questions on ticketing,
boarding, in-flight service, baggage
handling, pilot communication, and so
forth.

Twenty-five questions offered a range of

possible answers: excellent, good, fair,
or poor. A response of excellent was
given a score of 4, good a 3, fair a 2,
and poor a 1. These responses were
then totaled, so the total score was an
indication of the satisfaction with the Step 1: State the null and alternate hypotheses.
flight. Brunner Marketing Research,
Inc., randomly selected and surveyed H0: µE = µA = µT = µO
passengers from the four airlines. H1: The means are not all equal
Reject H0 if F > F,k-1,n-k
Is there a difference in the mean satisfaction
level among the four airlines?
Use the .01 significance level. Step 2: State the level of significance.
The .01 significance level is stated in the
problem.
 ANOVA – Example
Step 3: Find the appropriate test statistic. Use the F statistic
Calculations: It is convenient to summarize the calculations of F statistic in an ANOVA Table.
 ANOVA – Example
Compute the value of F and make a decision

We find deviation of each observation from the grand mean,

square the deviations, and sum this result for all 22
observations.
SS total = {(94-75.64)2 + (90-75.64)2 + ……+ (65-75.64)2 }
= 1485.10

To compute SSE, find deviation between each observation and its treatment mean. Each of these
values is squared and then summed for all 22 observations.
SSE = {(94-87.25)2 + (90-87.25)2 + ……+ (80-87.25)2 } + {(75-78.20)2 + (68-78.20)2 + ……+ (88-
78.20)2 } + {(70-72.86)2 + (73-72.86)2 + ……+ (65-72.86)2 } + {(68-69)2 + (70-69)2 + ……+ (65-
69)2 } = 594.41
Finally, determine SST = SS total – SSE.
SST = 1485.10 – 594.41 = 890.69
 ANOVA – Example
Step 3: Find the appropriate test statistic. Use the F statistic
Calculations: It is convenient to summarize the calculations of F statistic in an
ANOVA Table.

Step 4: State the decision rule.

Reject H0 if: F > F,k-1,n-k
F > F.01,4-1,22-4
F > F.01,3,18
F > 5.09
Step 5: Make a decision.

The computed value of F is 8.99, which is greater than the critical value of 5.09, so the
null hypothesis is rejected.
Conclusion: The mean scores are not the same for the four airlines; at this point we can
only conclude there is a difference in the treatment means. We cannot determine which
treatment groups differ or how many treatment groups differ.
ANOVA Example – SPSS Output
Test of Homogeneity of Variances
Satisfaction
Levene Statistic df1 df2 Sig.
.962 3 18 .432

ANOVA

Satisfaction
Sum of
Squares df Mean Square F Sig.
Between 890.684 3 296.895 8.991 .001
Groups
Within Groups 594.407 18 33.023

Total 1485.091 21
ANOVA Example – SPSS Output
Multiple Comparisons
Satisfaction
Tukey HSD
(I) Carrier (J) Carrier Mean 95% Confidence Interval
Difference (I- Lower Upper
J) Std. Error Sig. Bound Bound
TWA 9.050 3.855 .124 -1.85 19.95
Eastern Allegheny 14.393 *
3.602 .004 4.21 24.57
Ozark 18.250* 3.709 .001 7.77 28.73
Eastern -9.050 3.855 .124 -19.95 1.85
TWA Allegheny 5.343 3.365 .410 -4.17 14.85
Ozark 9.200 3.480 .071 -.63 19.03
Eastern -14.393 *
3.602 .004 -24.57 -4.21
Allegheny TWA -5.343 3.365 .410 -14.85 4.17
Ozark 3.857 3.197 .631 -5.18 12.89
Eastern -18.250 *
3.709 .001 -28.73 -7.77
Ozark TWA -9.200 3.480 .071 -19.03 .63
Allegheny -3.857 3.197 .631 -12.89 5.18
*. The mean difference is significant at the 0.05 level.
ANOVA Example – SPSS Output
Homogeneous Subsets
Satisfaction
Tukey HSDa,b
Carrier
Subset for alpha = 0.05
N 1 2
Ozark 6 69.00
Allegheny 7 72.86
TWA 5 78.20 78.20
Eastern 4 87.25
Sig. .078 .085
Means for groups in homogeneous subsets are displayed.
a. Uses Harmonic Mean Sample Size = 5.266.
b. The group sizes are unequal. The harmonic mean of the group
sizes is used. Type I error levels are not guaranteed.
 Chi-squared Test of a
Contingency Table
 Test of Independence : Test on
association between two nominal
variables regarding contingency tables.

Null Hypothesis : Two variables are

independent
Alternative Hypothesis : The two variables
are dependent
The Chi-square Distribution
At the outset, we should know that the chi-
square distribution has only one parameter
called the ‘degrees of freedom’ (df ) as is the
case with the t-distribution. The shape of a
particular chi-square distribution depends on
the number of degrees of freedom.
Properties of Chi-square Distribution

1. Chi-square is non-negative in value; it is

either zero or positively valued.

2. It is not symmetrical; it is skewed to the

right.

3. There are many chi-square distributions.

As with the t-distribution, there is a
different chi-square distribution for each
degree-of-freedom value.
 The chi-squared statistic measures the difference
between the actual counts and the expected
counts ( assuming validity of the null hypothesis)

( Observed count - Expected count )2

The sum
Expected count

O  E 
k
2

 i i

i 1 Ei
 Contingency table 2 test – Example

– In an effort to better predict the demand for courses

offered by a certain MBA program, it was hypothesized
that students’ academic background affect their choice
of MBA major, thus, their courses selection.
– A random sample of last year’s MBA students was
selected. The data is given in the file Chi-Sq_MBA.sav.
– The following contingency table summarizes relevant
data.
Contingency table  test – 2

Example
Degree Accounting Finance Marketing
BA 31 13 16 60
BENG 8 16 7 31
BBA 12 10 17 60
Other 10 5 7 39
61 44 47 152

The observed values

 Contingency table  test – 2

Example
 Solution
– The hypotheses are:
H0: The two variables are independent
H1: The two variables are dependent

– The test statistic – The rejection region

(Oi  Ei )
k 2
 2
  2   2,(r 1)( c 1)
i 1 Ei
k is the number of cells in
the contingency table.
 Estimating the expected
frequencies
Undergraduate MBA Major
Degree Accounting Finance Marketing Probability
BA 6060 60/152
BENG 31 31/152
BBA 3939 39/152
Other 22 22/152
6161 44
44 47 152
152
Probability 61/152 44/152 47/152

Under the null hypothesis the two variables are independent:

P(Accounting and BA) = P(Accounting)*P(BA)= [61/152][60/152].

The number of students expected to fall in the cell “Accounting - BA” is
eAcct-BA = n(pAcct-BA) = 152(61/152)(60/152) = [61*60]/152 = 24.08
The number of students expected to fall in the cell “Finance - BBA” is
eFinance-BBA = npFinance-BBA = 152(44/152)(39/152) = [44*39]/152 = 11.29
 The expected frequencies for a
contingency table
• The expected frequency of cell of raw i and
column j in the contingency table is calculated by

(Column j total)(Row i total)

Eij =
Sample size
 k
(Oi  Ei ) 2
 
2

i 1 Ei
Calculation of the 2 statistic
• Solution – continued
Undergraduate MBA Major
Degree Accounting Finance Marketing
BA 31 24.08
31 (24.08)
k 13 (17.37) 2 16 (18.55) 60
(f  e )

BENG 2 8 (12.44) 16 (8.97) 7 (9.58) 31
 
BBA 31 24.08
12 (15.65)
i i
10 (11.29) 17 (12.06) 39
Other
31 24.08
10 (8.83)
1
i61
e 55 6.39
(6.39) 77 6.80
i
(6.80) 22
44 47 152
5 6.39 7 6.80
31 24.08
The expected frequency
5 6.39 7 6.80
31 24.08
5 6.39 7 6.80

 2= (31 - 24.08)2
24.08 +….+
(5 - 6.39)2
6.39 +….+
(7 - 6.80)2
6.80
= 14.70
Contingency table  test – 2

Example
• Solution – continued
– The critical value in our example is:
 2 ,( r 1)( c 1)   .205,( 4 1)( 31)  12.5916
• Conclusion:
Since 2 = 14.70 > 12.5916, there
is sufficient evidence to infer at 5% significance

level that students’ undergraduate degree

and MBA students courses selection
are dependent.
 SPSS Output
Chi-Square Tests

Asymp. Sig. (2-

Value df sided)
Pearson Chi-Square
14.702a 6 .023

Likelihood Ratio
13.781 6 .032

Linear-by-Linear Association
2.003 1 .157

N of Valid Cases
152

a. 0 cells (.0%) have expected count less than 5. The minimum expected count is
6.37.
Yates’ Correction for Continuity
Chi-square distribution is a continuous
distribution. Whenever the degrees of freedom
(in case of a 2x2 table), certain corrections for
continuity can be made
 Required conditions –
the rule of five
 The test statistic used to perform the test
is only approximately Chi-squared
distributed.
 For the approximation to apply, the
expected cell frequency has to be at least
5 for all the cells (np  5).
 If the expected frequency in a cell is less
than 5, combine it with other cells.