Chap 11

Statistics for
Business and Economics

6th Edition
Chapter 11
Hypothesis Testing II
Chapter Goals
After completing this chapter, you should be able to:
■ Test hypotheses for the difference between two population means
■ Two means, matched pairs
■ Independent populations, population variances known
■ Independent populations, population variances unknown but
equal
■ Complete a hypothesis test for the difference between two
proportions (large samples)
■ Use the chi-square distribution for tests of the variance of a normal
distribution
■ Use the F table to find critical F values
Statistics for Business and
■ Complete an F test for the equality of two variances
Economics, 6e © 2007 Pearson
Education, Inc. 2
Two Sample Tests
Two Sample Tests
Population Population
Means, Means, Population Population
Matched Independent Proportions Variances
Pairs Samples
Examples:
Same group Group 1 vs. Proportion 1 vs. Variance 1 vs.
before vs. after independent Proportion 2 Variance 2
treatment Group 2
(Note similarities to Chapter 9)
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Matched Pairs
Tests Means of 2 Related Populations
Matched ■ Paired or matched samples
■ Repeated measures (before/after)
Pairs
■ Use difference between paired values:
di = xi - yi
■ Assumptions:
■ Both Populations Are Normally Distributed

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Test Statistic: Matched Pairs
The test statistic for the mean
Matched difference is a t value, with
Pairs n – 1 degrees of freedom:
Where
D0 = hypothesized mean difference
sd = sample standard dev. of differences
n = the sample size (number of pairs)
5
Decision Rules: Matched Pairs
Paired Samples
Lower-tail test: Upper-tail test: Two-tail test:
H0: μx – μy ≥ 0 H0: μx – μy ≤ 0 H0: μx – μy = 0
H1: μx – μy < 0 H1: μx – μy > 0 H1: μx – μy ≠ 0
α α α/2 α/2
-tα tα -tα/2 tα/2

Reject H0 if t < -tn-1, α Reject H0 if t > tn-1, α Reject H0 if t < -tn-1 , α/2
or t > tn-1 , α/2
has n - 1 d.f.
Economics, 6eWhere
© 2007 Pearson
Education, Inc. 6
Matched Pairs Example
■ Assume you send your salespeople to a
“customer service” training workshop. Has the
training made a difference in the number of
complaints? You collect the following data:
Σ di
Number of Complaints: (2) - (1) d = n
Salesperson Before (1) After (2) Difference, di
= - 4.2
C.B. 6 4 - 2
T.F. 20 6 -14
M.H. 3 2 - 1
R.K. 0 0 0
M.O. 4 0 - 4
Statistics for Business and -21
Education, Inc. 7
Matched Pairs: Solution
■ Has the training made a difference in the number of
complaints (at the α = 0.01 level)?
Reject Reject
H0: μx – μy = 0
H1: μx – μy ≠ 0 α/2
α/2
- 4.604 4.604
α = .01 d = - 4.2
- 1.66
Critical Value = ± 4.604
d.f. = n - 1 = 4 Decision: Do not reject H0
(t stat is not in the reject region)
Test Statistic:
Conclusion: There is not a
significant change in the
number of complaints.
8
Difference Between Two Means
Population means, Goal: Form a confidence interval

independent for the difference between two
samples population means, μx – μy
■ Different data sources
■ Unrelated
■ Independent
■ Sample selected from one population has no effect on the
sample selected from the other population

Education, Inc. 9
Difference Between Two Means
(continued)
Population means,
independent
samples
σx2 and σy2 known Test statistic is a z value
σx2 and σy2 unknown
σx2 and σy2

assumed equal Test statistic is a a value from the
Statistics for Business
2 2
and Student’s t distribution
σx and σy
assumed unequal
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σx2 and σy2 Known
Population means, Assumptions:

independent
▪ Samples are randomly and
samples
independently drawn
σx2 and σy2 known
* ▪ both population distributions
σx2 and σy2 unknown are normal
▪ Population variances are

known
Education, Inc. 11
σx2 and σy2 Known
(continued)
When σx2 and σy2 are known and

Population means,
independent both populations are normal, the
samples variance of X – Y is
σx2 and σy2 known

*
…and the random variable

Economics, 6e © 2007 Pearsonhas a standard normal distribution
Education, Inc. 12
Test Statistic,
σx2 and σy2 Known
Population means,
independent The test statistic for
samples μx – μy is:
σx2 and σy2 known

*

Education, Inc. 13
Hypothesis Tests for
Two Population Means
Two Population Means, Independent Samples
H0: μx ≥ μy H0: μx ≤ μy H0: μx = μy

H1: μx < μy H1: μx > μy H1: μx ≠ μy
i.e., i.e., i.e.,
Education, Inc. 14
Decision Rules
Two Population Means, Independent
Samples, Variances Known
α α α/2 α/2
-zα zα -zα/2 zα/2

Statistics
Reject H0for
if zBusiness
< -zα and
Reject H0 if z > zα Reject H0 if z < -zα/2
Economics, 6e © 2007 Pearson or z > zα/2
Education, Inc. 15
σx2 and σy2 Unknown,
Assumed Equal

independent
samples
independently drawn
σx2 and σy2 known ▪ Populations are normally

distributed
σx2 and σy2
assumed equal * unknown but assumed equal
σx2 and σy2

assumed unequal
16
Assumed Equal
(continued)
Population means, Forming interval

independent estimates:
samples
▪ The population variances
σx2 and σy2 known are assumed equal, so use
the two sample standard
deviations and pool them to
estimate σ
σx2 and σy2
assumed equal * ▪ use a t value with
(nx + ny – 2) degrees of
σx2 and σy2 freedom
assumed unequal
17
Test Statistic,
σx2 and σy2 Unknown, Equal
σx2 and σy2 unknown The test statistic for

μx – μy is:
σx2 and σy2
assumed equal *
σx2 and σy2
assumed unequal
Where t has (n1 + n2 – 2) d.f.,

and
Education, Inc. 18
Assumed Unequal

independent
samples
independently drawn
σx2 and σy2 known ▪ Populations are normally

distributed
σx2 and σy2 unknown and assumed
assumed equal unequal
*
2 2
σx and σy
assumed unequal
Education, Inc. 19
Assumed Unequal
(continued)
Population means,
Forming interval estimates:
independent
samples ▪ The population variances are
assumed unequal, so a pooled
variance is not appropriate
σx2 and σy2 known
▪ use a t value with ν degrees
σx2 and σy2 unknown of freedom, where
σx2 and σy2

assumed equal
*
2 2
σx and σy
assumed unequal
Education, Inc. 20
Test Statistic,
σx2 and σy2 Unknown, Unequal
σx2 and σy2 unknown The test statistic for

μx – μy is:
σx2 and σy2
assumed equal
σx2 and σy2
assumed unequal *
Where t has ν degrees of freedom:
21
Decision Rules
Two Population Means, Independent
Samples, Variances Unknown
α α α/2 α/2
-tα tα -tα/2 tα/2

Reject H0 if t < -tn-1, α Reject H0 if t > tn-1, α Reject H0 if t < -tn-1 , α/2
Statistics for Business and or t > tn-1 , α/2
Where t has n - 1 d.f.
Education, Inc. 22
Pooled Variance t Test: Example
You are a financial analyst for a brokerage firm. Is there
a difference in dividend yield between stocks listed on
the NYSE & NASDAQ? You collect the following data:
NYSE NASDAQ
Number 21 25
Sample mean 3.27 2.53
Sample std dev 1.30 1.16
Assuming both populations are

approximately normal with
equal variances, is
there afor
Statistics difference
Businessinand
average
yield (α =6e
Economics, 0.05)?
© 2007 Pearson
Education, Inc. 23
Calculating the Test Statistic
The test statistic is:

Education, Inc. 24
Solution
Reject H0 Reject H0
H0: μ1 - μ2 = 0 i.e. (μ1 = μ2)
H1: μ1 - μ2 ≠ 0 i.e. (μ1 ≠ μ2)
.025 .025
α = 0.05
df = 21 + 25 - 2 = 44 - 0 t
Critical Values: t = ± 2.0154 2.0154 2.0154
2.040
Test Statistic: Decision:
Reject H0 at α = 0.05
Conclusion:
Statistics for Business and There is evidence of a
Economics, 6e © 2007 Pearson difference in means.
Education, Inc. 25
Two Population Proportions
Goal: Test hypotheses for the
Population difference between two population
proportions proportions, Px – Py
Assumptions:
Both sample sizes are large,
nP(1 – P) > 9

Education, Inc. 26
(continued)
■ The random variable

Population
proportions
is approximately normally distributed

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Test Statistic for
The test statistic for
Population H0: Px – Py = 0
proportions is a z value:
Statistics for Business and Where

Education, Inc. 28
Decision Rules: Proportions
Population proportions
H0: px – py ≥ 0 H0: px – py ≤ 0 H0: px – py = 0
H1: px – py < 0 H1: px – py > 0 H1: px – py ≠ 0
α α α/2 α/2
-zα zα -zα/2 zα/2

Reject H0 if z < -zα Reject H0 if z > zα Reject H0 if z < -zα/2
Statistics for Business and or z > zα/2
Education, Inc. 29
Example:
Is there a significant difference between the
proportion of men and the proportion of
women who will vote Yes on Proposition A?
■ In a random sample, 36 of 72 men and 31 of

50 women indicated they would vote Yes
■ Test at the .05 level of significance

Education, Inc. 30
Example:
(continued)
■ The hypothesis test is:

H0: PM – PW = 0 (the two proportions are equal)
H1: PM – PW ≠ 0 (there is a significant difference between
proportions)
■ The sample proportions are:
■ Men: = 36/72 = .50
■ Women: = 31/50 = .62
▪ The estimate for the common overall proportion

is:
31
Example:
(continued)
Reject H0 Reject H0
The test statistic for PM – PW = 0 is:

.025 .025
-1.96 1.96
-1.31
Decision: Do not reject H0

Conclusion: There is not
significant evidence of a
Statistics for Business and difference between men
Critical Values = ±1.96 and women in proportions
Economics,For6eα© 2007 Pearson
= .05
Education, Inc. who will vote yes.
32
Hypothesis Tests of
one Population Variance
▪ Goal: Test hypotheses about the
Population population variance, σ2
Variance
▪ If the population is normally distributed,
follows a chi-square distribution with

(n – 1) degrees of freedom
Education, Inc. 33
Confidence Intervals for the
Population Variance
(continued)
The test statistic for

Population hypothesis tests about one
Variance
population variance is

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Decision Rules: Variance
Population variance
H0: σ2 ≥ σ02 H0: σ2 ≤ σ02 H0: σ2 = σ02
H1: σ2 < σ02 H1: σ2 > σ02 H1: σ2 ≠ σ02
α α α/2 α/2
Reject H0 if Reject H0 if Reject H0 if

Economics, 6e © 2007 Pearson or
Education, Inc. 35
Hypothesis Tests for Two Variances
▪ Goal: Test hypotheses about two

Tests for Two
population variances
Population
Variances H0: σx2 ≥ σy2 Lower-tail test
H1: σx2 < σy2
F test statistic
H0: σx2 ≤ σy2 Upper-tail test
H1: σx2 > σy2
H0: σx2 = σy2

Two-tail test
H1: σx2 ≠ σy2
The two populations are assumed to be
independent and normally distributed
36
Hypothesis Tests for Two Variances
(continued)
The random variable

Tests for Two
Population
Variances
F test statistic
Has an F distribution with (nx – 1)
numerator degrees of freedom and (ny
– 1) denominator degrees of freedom
Denote an F value with ν1 numerator and ν2

denominator degrees of freedom by
37
Test Statistic
Tests for Two The critical value for a hypothesis test

Population about two population variances is
Variances
F test statistic
where F has (nx – 1) numerator

degrees of freedom and (ny – 1)
denominator degrees of freedom
Education, Inc. 38
Decision Rules: Two Variances
Use sx2 to denote the larger variance. H0: σx2 = σy2
H0: σx2 ≤ σy2 H1: σx2 ≠ σy2
H1: σx2 > σy2
α α/2
0 0 F
Do not
reject H0
Reject H0 F Do not
reject H0
Reject H0
■ rejection region for a two-

tail test is:

where sx2 is the larger of the
Economics, 6e © 2007 Pearson two sample variances
Education, Inc. 39
Example: F Test
You are a financial analyst for a brokerage firm. You want to

compare dividend yields between stocks listed on the NYSE &
NASDAQ. You collect the following data:
NYSE NASDAQ
Number 21 25
Mean 3.27 2.53
Std dev 1.30 1.16
Is there a difference in the variances between the

NYSE & NASDAQ at the α = 0.10 level?
Education, Inc. 40
F Test: Example Solution
■ Form the hypothesis test:
H0: σx2 = σy2 (there is no difference between variances)
H1: σx2 ≠ σy2 (there is a difference between variances)
■ Find the F critical values for α

= .10/2:
Degrees of Freedom:
■ Numerator
(NYSE has the larger
standard deviation):
■ nx – 1 = 21 – 1 = 20 d.f.
■ Denominator:
■ ny – 1 = 25 – 1 = 24 d.f.
41
F Test: Example Solution
(continued)
■ The test statistic is: H 0 : σ x 2 = σy 2

H 1 : σ x 2 ≠ σy 2
α/2 = .05
Do not
F
Reject H0
reject H0
■ F = 1.256 is not in the
rejection region, so we do not
reject H0
■ Conclusion: There is not sufficient evidence
Statistics for Business
of a difference and
in variances at α = .10
Education, Inc. 42
Two-Sample Tests in EXCEL
For paired samples (t test):

■ Tools | data analysis… | t-test: paired two sample for means
For independent samples:

■ Independent sample Z test with variances known:
■ Tools | data analysis | z-test: two sample for means
For variances…
■ F test for two variances:
■ Tools | data analysis | F-test: two sample for variances
Education, Inc. 43
Two-Sample Tests in PHStat

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Sample PHStat Output
Input
Output

Education, Inc. 45
Sample PHStat Output
(continued)
Input
Output

Education, Inc. 46
Chapter Summary
■ Compared two dependent samples (paired

samples)
■ Performed paired sample t test for the mean
difference
■ Compared two independent samples
■ Performed z test for the differences in two means
■ Performed pooled variance t test for the differences
in two means
■ Compared two population proportions
■ Performed
Statistics z-test
for Business andfor two population proportions
Education, Inc. 47
Chapter Summary
(continued)
■ Used the chi-square test for a single population

variance
■ Performed F tests for the difference between
two population variances
■ Used the F table to find F critical values

Education, Inc. 48

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Statistics for

Business and Economics

Two Sample Tests

Statistics for Business and

-tα tα -tα/2 tα/2

Population means, Goal: Form a confidence interval

Statistics for Business and

σx2 and σy2 known Test statistic is a z value

σx2 and σy2 unknown

σx2 and σy2

Population means, Assumptions:

▪ Population variances are

When σx2 and σy2 are known and

σx2 and σy2 known

Statistics for Business and

σx2 and σy2 known

Statistics for Business and

Lower-tail test: Upper-tail test: Two-tail test:

H0: μx ≥ μy H0: μx ≤ μy H0: μx = μy

-zα zα -zα/2 zα/2

Population means, Assumptions:

σx2 and σy2 known ▪ Populations are normally

σx2 and σy2

Population means, Forming interval

σx2 and σy2 unknown The test statistic for

Where t has (n1 + n2 – 2) d.f.,

Population means, Assumptions:

σx2 and σy2 known ▪ Populations are normally

σx2 and σy2

σx2 and σy2 unknown The test statistic for

Where t has ν degrees of freedom:

-tα tα -tα/2 tα/2

Assuming both populations are

Statistics for Business and

Statistics for Business and

■ The random variable

is approximately normally distributed

Statistics for Business and

Statistics for Business and Where

-zα zα -zα/2 zα/2

■ In a random sample, 36 of 72 men and 31 of

■ Test at the .05 level of significance

Statistics for Business and

■ The hypothesis test is:

▪ The estimate for the common overall proportion

The test statistic for PM – PW = 0 is:

Decision: Do not reject H0

follows a chi-square distribution with

The test statistic for

Statistics for Business and

Reject H0 if Reject H0 if Reject H0 if

▪ Goal: Test hypotheses about two

H0: σx2 = σy2

The random variable

Denote an F value with ν1 numerator and ν2

Tests for Two The critical value for a hypothesis test

where F has (nx – 1) numerator

■ rejection region for a two-

Statistics for Business and

You are a financial analyst for a brokerage firm. You want to

Is there a difference in the variances between the

■ Find the F critical values for α