Making Predictions

Statistical Inference
• Recall:

Statistical inference is the process of making

an estimate, forecast or decision about a
population based on sample results.
Statistical inference is the primary purpose
of statistics.
Some Important Concepts in Statistical
Inference
• Parameters and Statistic

Parameters are characteristics of the population.

Statistic is a characteristic of the sample. Means
and standard deviations are examples of
parameter and statistic, depending on whether we
are talking of the population mean or standard
deviation; or sample mean or standard deviation.
Parameters are fixed values and these are
generally unknown. For example, at any
point in time, no one probably knows what
the mean age of all XXX students would be.
But, if one or two or more groups try to get
the information on the age of all XXX
students, they should all arrive at the same
value.
• Statistic, on the other hand, will vary from
sample to sample, and these may be easily
computed. For instance, one group may get
a representative sample of the population
of all xxx students. Another group may pick
a different representative sample. The
means of the two samples may be different.
 Two General Types of Statistical
Inference
• Estimation
Concept of Estimation
As its name suggests, the objective of
estimation is to determine the approximate
value of a population parameter on the
basis of a sample statistic. An estimator of
a population parameter is a random
variable that is a function of the sample
data.
An estimate is the calculation of a specific value of this
random variable. The sample mean is the estimator of the
population mean. The sample standard deviation is the
estimator of the population standard deviation. Once the
sample has been drawn and the statistics calculated, the
value of the sample mean becomes the estimate of the
population mean, and the value of the sample standard
deviation becomes the estimate of population standard
deviation.
We can use sample data to estimate a population parameter
in two ways. First, we can make a point estimate. We can
compute the value of the estimator and consider that
value as the estimate of the parameter. We are using one
value or point to infer the value of the parameter. When
drawing inferences about a population, our intuition tells
us that the larger the sample, the more accurate the
results. But, point estimates don’t reflect the effects of
larger sample sizes.
• A second way of estimating a population
parameter is to make an interval estimate.
We estimate the value of the parameter by
reference to an interval rather than a single
point. The interval estimator is affected by
the sample size.
 Concept of Hypothesis Testing
• Another way of drawing inference about a
population is through hypothesis testing.
The objective of the hypothesis testing is to
determine whether or not the sample data
support some belief or hypothesis about the
population.
 Steps in Hypothesis Testing

1. Formulate the hypothesis

Types of hypotheses:
a. Null Hypothesis (Ho)
b. Alternative hypothesis (Ha)
The null hypothesis is usually one that a researcher
wants to reject. If we reject the null hypothesis,
declare it to be false, we accept the alternative
hypothesis.
The null hypothesis hypothesizes “no
difference”, or “no effect”, or “no
relationship”. The null hypothesis may also
specify that the value of a parameter of
interest is some value.
The alternative hypothesis is the hypothesis the
researcher wants to prove. The purpose of the
alternative hypothesis is to determine whether or
not the evidence provided by the sample is
enough to establish that the null hypothesis is not
true. If there is enough such evidence, then we
will say that there is evidence to support the
alternative hypothesis.
• There are several types of null hypothesis
that we will discuss in this course. These
may be categorized according to problem
objective: (1) Description of a Single
Population; (2) Comparison of two
populations; (3) Analysis of the relationship
between two variables
 Three Possible Forms of the Alternative
Hypothesis
a. If we are interested in determining whether or not the
parameter is not equal to the value of the parameter
specified by the null hypothesis, the alternative
hypothesis will use the “not equal” sign.
b. If we want to determine whether or not the sample data
allow us to conclude that the parameter exceeds the
value of the parameter specified by the null hypothesis,
the alternative hypothesis will use the “greater than” sign.
If we want to determine whether or not the
sample data allows us to conclude that the
parameter is less than the parameter
specified by the null hypothesis, the
alternative hypothesis will use the “less
than” sign.
2. Selecting the Statistical Analysis Model to be
used
Having specified the null and alternative
hypotheses, we then select the appropriate test
statistic or statistical model to be used. The
choice of our statistic would depend on a number
of factors. (1) the nature of the hypothesis
problem; (2) the level of measurement; and (3)
assumptions of normality.
 Some statistical models
• The Z-test for a single sample test of the mean
• The T-test for a single sample test of the mean
• The Z-test for a single sample test of proportion
• The Z-test for a difference of means test
• The T-test for a difference of means test
• The Z-test for a difference of proportions test
• Pearson’s product moment correlation coefficient test
• Spearman’s rank correlation coefficient test
• Chi-square test of independence
3. Setting Criteria for rejecting the null
hypothesis

a. Selecting a significance level

b. Determining the area of rejection
• The level of significance refers to the
probability of rejecting the null hypothesis
when it is true. This is called a Type I error
or alpha error. The level of significance
refers to the probability that we will reject
the null hypothesis. We make the selection
of the level of significance before we
compute for the test statistic.
We need to select a level of significance that we think is
reasonable. The decision as to which significance level to
use depends on the question involved. Social scientists
routinely accept a probability of .05 for rejecting the null
hypothesis. If a statistical test would lead to significant
policy recommendations, then you may wish to reduce the
risk of being in error and signify a significance level of .01
or .001.
Based on the significance level we choose, we
then delineate our region of acceptance and
region of rejection. The region of rejection is also
called the critical region. Outcomes falling here
mean we reject the null hypothesis. Our critical
region will also depend on whether we are doing
a right-tailed test, a left-tailed test or a two-tailed
test.
If our alternative hypothesis involves the
greater than sign, we use a right-tailed test.
When our alternative hypothesis involves
the less than sign, we use a left-tailed test.
When our alternative hypothesis involves
the not equal sign, we will use a two-tailed
test.
“I know this is difficult to comprehend at
the moment. When we start going
through process of hypothesis testing
using concrete examples, this will be
clearer to you”.
4. Analysis
The analysis part is the process of computing
for our test statistic based on the
assumptions we made and the data we
have.
5. Making a decision
In assessing the null hypothesis, we can either accept the
null hypothesis or reject it in favor of the alternative
hypothesis. Our decision will be based on the value of the
test statistic we obtain in the analysis stage. If the value of
the test statistic is located in the critical region, we reject
the null hypothesis in favor of the alternative hypothesis.
Our findings may be taken conclusive even if there is the
probability that we may be in the error.
If the test statistic is located in the
acceptance region, we accept the null
hypothesis but our findings are not
conclusive. We simply do not have
evidence to prove our alternative
hypothesis.
• This may be compared to a judge who, upon
making a decision, for instance, hands down a
verdict of “guilty”. When the judge makes this
pronouncement, the defendant is conclusively
declared as guilty and he serves the sentence
imposed even if there is the probability he is
actually not guilty (only God and the defendant
can really say whether he is guilty or not).
But, when the judge hands down the verdict
of “not guilty”, it usually is not because it
has been proven, beyond reasonable
doubt, that he is not guilty. There simply is
not enough evidence to prove the
defendant guilty.
 Directional and non-directional
hypothesis
• Directional test of hypothesis is considered if the
direction of the difference is stated. This test
makes use of the one-tailed test or one-sided test.
• The test is considered non-directional if the
direction or the nature of the difference is not
stated. The non-directional test makes use of the
two-tailed test.