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Hypothesis Testing

Hypothesis testing involves stating a null hypothesis and an alternative hypothesis, selecting a significance level, identifying a test statistic, formulating a decision rule, computing the test statistic value, and making a conclusion about whether to reject or fail to reject the null hypothesis. The key steps are: 1) State the null and alternative hypotheses 2) Select a significance level like 5% 3) Identify the appropriate test statistic like z-test, t-test, F-test, chi-square test 4) Make a decision to reject or fail to reject the null based on the test statistic value 5) Conclude whether the sample provides enough evidence to reject the null hypothesis.

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Andrew Mwinga
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76 views4 pages

Hypothesis Testing

Hypothesis testing involves stating a null hypothesis and an alternative hypothesis, selecting a significance level, identifying a test statistic, formulating a decision rule, computing the test statistic value, and making a conclusion about whether to reject or fail to reject the null hypothesis. The key steps are: 1) State the null and alternative hypotheses 2) Select a significance level like 5% 3) Identify the appropriate test statistic like z-test, t-test, F-test, chi-square test 4) Make a decision to reject or fail to reject the null based on the test statistic value 5) Conclude whether the sample provides enough evidence to reject the null hypothesis.

Uploaded by

Andrew Mwinga
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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HYPOTHESIS TESTING

Hypothesis: It’s a statement about a population parameter developed for the purpose of
testing.
Hypothesis testing: It’s a procedure based on sample evidence and probability theory to
determine whether the hypothesis is a reasonable statement.

Procedure for testing a hypothesis


1. State the null and alternate hypothesis
2. Select a level of significance.
3. Identify the test statistic
4. Formulate a decision rule and identify the rejection region
5. Compute the value of the test statistic
6. Make a conclusion.

State the null hypothesis (HO) and alternate hypothesis (HA)


 The null hypothesis is a statement about the value of a population parameter. It should
be stated as “There is no significant difference between ……………”. It should always
contain an equal sign.
 The alternate hypothesis is a statement that is accepted if sample data provide enough
evidence that the null hypothesis is false.

Select a level of significance


A level of significance is the probability of rejecting the null hypothesis when it is true. It is
designated by  and should be between 0 –1.

Types of errors that can be committed


i. Type I error: it is rejecting the null hypothesis, when it is true.
ii. Type II error: It is not rejecting the null hypothesis, when it is false.

Null hypothesis Do not reject HO Reject HO


HO is True Correct decision Type I error
HO is false Type II error Correct decision

Identify the test statistic


A test statistic is the statistic that will be used to test the hypothesis e.g.
, , Fand 2 (chi  square)
Formulate a decision rule
A decision rule is a statement of the conditions under which the null hypothesis is rejected
and the conditions under which it is not rejected. The region or area of rejection defines the
location of all those values that are so large or so small that the probability of their
occurrence under a true null hypothesis is rather remote.

Compute the value of the test statistic and make a conclusion.


The value of the test statistic is determined from the sample information, and is used to
determine whether to reject the null hypothesis or not.

One-tailed and Two-tailed tests


 A test is one tailed when the alternate hypothesis states a direction e.g.
Ho: The mean income of women is equal to the mean income of men
HA: The mean income of women is greater than the mean income of men

 A test is two tailed if no direction is specified in the alternate hypothesis


Ho: There is no difference between the mean income of women and the mean
income of men
HA: There is a difference between the mean income of women and the mean
income of men

HYPOTHESIS TESTING OF MEAN WHEN THE POPULATION VARIANCE IS


KNOWN
When the population variance is known and the population is normally distributed, the test
x
statistic for testing hypothesis about  is Z  .

n

Estimating the population mean when the population variance is known


The confidence interval estimator of  when  2 is known is
x  Z 
2 n

Examples
1. A study by the Coca-Cola Company showed that the typical adult Kenyan consumes 18
gallons of Coca-Cola each year. According to the same survey, the standard deviation of
the number of gallons consumed is 3.0. A random sample of 64 college students showed
they consumed an average (mean) of 17 gallons of cola last year. At the 0.05 significance
level, can we conclude that there is a significance difference between the mean
consumption rate of college students and adults?
2. Past experience indicates that the monthly long distance telephone bill per household in a
particular community is normally distributed, with a mean of Sh. 1012 and a standard
deviation of Sh. 327. After an advertising campaign that encouraged people to make long
distance telephone calls more frequently, a random sample of 57 households revealed that
the mean monthly long distance bill was Sh. 1098. Can we conclude at the 10%
significance level that the advertising campaign was successful?
3. A factory manufactures cars with a warranty of 5 years on the engine and transmission.
An engineer believes that the engine or transmission will malfunction in less than 5 years.
He tests a sample of 40 cars and finds the average time to be 4.8 years with a standard
deviation of 0.50. At a 5 % significance level, is there enough evidence to support the
idea that the warranty should be revised?
4. The average IQ for the adult population is 100 with a standard deviation of 15. A
researcher believes this value has changed. The researcher decides to test the IQ of 75
random adults. The average IQ of the sample is 105. Is there enough evidence to suggest
that the average IQ has changed?
5. The average IQ of the adult population is 100. A researcher believes the average IQ of
adults is lower. A random sample of 5 adults are tested and scored 69, 79, 89, 99, 109.
(15.81 standard deviation). Is there enough evidence to suggest the average IQ is lower at
5% significance level

HYPOTHESIS TESTING OF THE POPULATION PROPORTIONS


The null and alternate hypotheses of tests of proportions are set up in the same way as the
pˆ  p
hypothesis of tests about mean and variance. The test statistic for p is Z 
pq
n
Example:
In a certain population, the proportion of smokers was 20% before an antismoking campaign
was carried out. After the campaign, out of 40 people randomly selected, it was found that 6
were smokers. Has the campaign against smoking been effective? Test at 5% level of
significance.

pˆ qˆ
Confidence interval estimator of p is pˆ  Z 
2 n

HYPOTHESIS TESTING FOR DIFFERENCES BETWEEN TWO MEANS WHEN


THE POPULATION VARIANCES ARE KNOWN

The test statistic for  1   2 when  1 and  2 are known is


2 2

( x1  x 2 )  ( 1   2 )
Z
 12  22

n1 n2
Confidence interval estimator of  1   2 when  1 and  2 are known is
2 2
 12  22
1   2  ( x1  x 2 )  Z  
2 n1 n2

Example
1. The selection of a new store location depends on many factors, one of which is the
level of household income in areas around the proposed site. A large departmental
store chain is trying to decide whether to build a new store in Nakuru or in the nearby
city of Nairobi. Building costs are lower in Nairobi and the company decides it will
build there unless the average household income is higher in Nakuru than in Nairobi.
In a survey of 100 residences in each of the cities, the mean household was Sh. 29,980
in Nakuru and Sh. 28,650 in Nairobi. From other sources, it is known that the
population standard deviations of households’ incomes are Sh. 4,740 in Nakuru and
Sh. 5,365 in Nairobi.
(a) At the 5% significance level, can it be concluded that the mean household income in
Nakuru exceeds that of Nairobi?
(b) Estimate with 90% confidence level, the difference in means between the mean
household income in Nakuru and that of Nairobi?
2. The mean height of 50 male students who showed above average participation in
college athletics was 68.2 inches with a standard deviation of 2.5 inches, while 50
male students who showed no interest in such participation had a mean height of 67.5
inches with a standard deviation of 2.8 inches. Test the hypothesis that male student
who participate in college athletics are taller than the other male students at a
significance level of 5%

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