Chapter 18 - Nonparametric Methods

18.1 - Sign Test

18.2 - Wilcoxon Signed Rank Test

18.3 - Mann-Whitney-Wilcoxon Test

18.4 - Kruskal-Wallis Test

18.5 - Rank Correlation

• Most of the statistical methods referred to as parametric require the use of interval-or ratio-
scaled data.

• Nonparametric methods are often the only way to analyze categorical (nominal or ordinal)
data and draw statistical conclusions.

• Nonparametric methods require no assumptions about the population probability

• Nonparametric methods are often called distribution-free methods.

• Whenever the data are quantitative, we will transform the data into categorical data in order
to conduct the nonparametric test.

Sign Test

• The sign test is a versatile method for hypothesis testing that uses the binomial distribution
with p = .50 as the sampling distribution.

• We present two applications of the sign test:

• A hypothesis test about a population median

• A matched-sample test about the difference between two populations

Hypothesis Test about a Population Median

We can apply the sign test by:

• Using a plus sign whenever the data in the sample are above the hypothesized value of the
median

• Using a minus sign whenever the data in the sample are below the hypothesized value of the
median

• Discarding any data exactly equal to the hypothesized median

• The sample size is the number of trials.

• There are two outcomes possible per trial, a plus sign or a minus sign.

• The trials are independent.

• We let 𝑝 denote the probability of a plus sign.

• If the population median is in fact a particular value, 𝑝 should equal 0.5.

Hypothesis Test about a Population Median: Small-Sample Case

Lawler’s Grocery Store made the decision to carry Cape May Potato Chips based on the
manufacturer’s estimate that the median sales should be $450 per week on a per-store basis.

Lawler’s has been carrying the potato chips for three months. Data showing one-week sales at 10
randomly selected Lawler’s stores are shown here.
Lawler’s management requested the following hypothesis test about the population median weekly
sales of Cape May Potato Chips (using a = 0.10).

𝐻0 : Median Sales = $450

𝐻𝑎 : Median Sales ≠ $450

In terms of the binomial probability 𝑝:

𝐻0 : 𝑝 = 0.50

𝐻𝑎 : 𝑝 ≠ 0.50

Example: Potato Chip Sales

Binomial Probabilities with n = 10 and p = 0.50

Example: Potato Chip Sales

Because the observed number of plus signs is 7, we begin by computing the probability of obtaining
7 or more plus signs.

The probability of 7, 8, 9, or 10 plus signs is:

0.1172 + 0.0439 + 0.0098 + 0.0010 = 0.1719.

We are using a two-tailed hypothesis test, so:

𝑝-value = 2(0.1719) = 0.3438.

With 𝑝-value > a, (0.3438 > 0.10), we cannot reject 𝐻0 .

Conclusion

Because the 𝑝-value > a, we cannot reject 𝐻0 . There is insufficient evidence in the sample to reject
the assumption that the median weekly sales is $450.
Hypothesis Test about a Population Median: Larger Sample Size

With larger sample sizes, we rely on the normal distribution approximation of the binomial
distribution to compute the 𝑝-value, which makes the computations quicker and easier.

Normal Approximation of the Number of Plus Signs when

Example: Trim Fitness Center

A hypothesis test is being conducted about the median age of female members of the Trim Fitness
Center.

𝐻0 : Median Age = 34 years

𝐻𝑎 : Median Age ≠ 34 years

In a sample of 40 female members, 25 are older than 34, 14 are younger than 34, and 1 is 34. Is
there sufficient evidence to reject 𝐻0 ? Use a = 0.05.

Example: Trim Fitness Center

• Letting 𝑥 denote the number of plus signs, we will use the normal distribution to
approximate the binomial probability 𝑃(𝑥 ≤ 25).

• Remember that the binomial distribution is discrete and the normal distribution is
continuous.

• To account for this, the binomial probability of 25 is computed by the normal probability
interval 24.5 to 25.5.

Mean and Standard Deviation

Test Statistic

𝑝-value = 2(1 – 0.9726) = 0.0548

• Rejection Rule

Using 0.05 level of significance: Reject 𝐻0 if 𝑝-value < 0.05

• Conclusion

Do not reject 𝐻0 . The 𝑝-value for this two-tail test is .0548. There is insufficient evidence in the
sample to conclude that the median age is not 34 for female members of Trim Fitness Center.
Hypothesis Test with Matched Samples

• A common application of the sign test involves using a sample of 𝑛 potential customers to
identify a preference for one of two brands of a product.

• The objective is to determine whether there is a difference in preference between the two
items being compared.

• To record the preference data, we use a plus sign if the individual prefers one brand and a
minus sign if the individual prefers the other brand.

• Because the data are recorded as plus and minus signs, this test is called the sign test.

Hypothesis Test with Matched Samples: Small-Sample Case

Example: Major Call Center

Maria Gonzales is the supervisor responsible for scheduling telephone operators at a major call
center. She is interested in determining whether her operators’ preferences between the day shift (7
a.m. to 3 p.m.) and evening shift (3 p.m. to 11 p.m.) are different.

Maria randomly selected a sample of 16 operators who were asked to state a preference for the one
of the two work shifts. The data collected from the sample are shown on the next slide.
 4 plus signs

10 negative signs

(n = 14)

Can Maria conclude, using a level of significance of a = 0.10, that operator preferences are different
for the two shifts?

𝐻0 : 𝑝 = 0.50 A preference for one shift over the other does exist.

𝐻𝑎 : 𝑝 ≠ 0.50 A preference for one shift over the other does not exist.

Binomial Probabilities with 𝑛 = 14 and 𝑝 = 0.50

Because the observed number of plus signs is 4, we begin by computing the probability of obtaining
4 or less plus signs.

The probability of 0, 1, 2, 3, or 4 plus signs is:

.00006 + .00085 + .00555 + .02222 + .06110 = .08978.

• We are using a two-tailed hypothesis test, so the 𝑝-value = 2(0.08978) = 0.17956.

• With 𝑝-value > a, (0.17956 > 0.10), we cannot reject 𝐻0 .

Conclusion

Because the 𝑝-value > a, we cannot reject 𝐻0 . There is insufficient evidence in the sample to
conclude that a difference in preference exists for the two work shifts.
Hypothesis Test with Matched Samples: Large-Sample Case

Example: Ketchup Taste Test

As part of a market research study, a sample of 80 consumers were asked to taste two brands of
ketchup and indicate a preference. Do the data shown on the next slide indicate a significant
difference in the consumer preferences for the two brands?

Hypotheses

Sampling Distribution for Number of Plus Signs

Rejection Rule

Test Statistic

𝑝-value
Conclusion

Because the 𝑝-value < a, we can reject 𝐻0 . There is sufficient evidence in the sample to conclude that
a difference in preference exists for the two brands of ketchup.

Wilcoxon Signed-Rank Test

• The Wilcoxon signed-rank test is a procedure for analyzing data from a matched samples
experiment.

• The test uses quantitative data but does not require the assumption that the differences
between the paired observations are normally distributed.

• It only requires the assumption that the differences have a symmetric distribution.

• This occurs whenever the shapes of the two populations are the same and the focus is on
determining if there is a difference between the two populations’ medians.

• Let 𝑇 − denote the sum of the negative signed ranks.

• Let 𝑇 + denote the sum of the positive signed ranks.

• If the medians of the two populations are equal, we would expect the sum of the negative
signed ranks and the sum of the positive signed ranks to be approximately the same.

• We use 𝑇 + as the test statistic.

Sampling Distribution of 𝑇+ for the Wilcoxon Signed-Rank Test

Mean:

Standard Deviation:

Distribution Form:

Example: Express Deliveries

A firm has decided to select one of two express delivery services to provide next-day deliveries to its
district offices. To test the delivery times of the two services, the firm sends two reports to a sample
of 10 district offices, with one report carried by one service and the other report carried by the
second service. Do the data on the next slide indicate a difference in the two services?
Hypotheses

𝐻0 : The difference in the median delivery times of the two services equals 0.

𝐻𝑎 : The difference in the median delivery times of the two services does not equal 0.

Preliminary Steps of the Test

• Compute the differences between the paired observations.

• Discard any differences of zero.

• Rank the absolute value of the differences from lowest to highest. Tied differences are
assigned the average ranking of their positions.

• Give the ranks the sign of the original difference in the data.

• Sum the signed ranks.

. . . next we will determine whether the sum is significantly different from zero.

Test Statistic

p-value p-value = 2(1 – 0.9535) = 0.093

Conclusion

Reject 𝐻0 .

The 𝑝-value for this two-tail test is 0.093. There is insufficient evidence in the sample to conclude
that a difference exists in the median delivery times provided by the two services.

Mann-Whitney-Wilcoxon Test

• This test is another nonparametric method for determining whether there is a difference
between two populations.

• This test is based on two independent samples.

• Advantages of this procedure are;

• It can be used with either ordinal data or quantitative data.

• It does not require the assumption that the populations have a normal distribution.

• Instead of testing for the difference between the medians of two populations, this method
tests to determine whether the two populations are identical.

• The hypotheses are:

• 𝐻0 : The two populations are identical

• 𝐻𝑎 : The two populations are not identical

Example: Westin Freezers

Manufacturer labels indicate the annual energy cost associated with operating home appliances such
as freezers.
The energy costs for a sample of 10 Westin freezers and a sample of 10 Easton Freezers are shown on
the next slide. Do the data indicate, using a = 0.05, that a difference exists in the annual energy costs
for the two brands of freezers?

Hypotheses

𝐻0 : Annual energy costs for Westin freezers and Easton freezers are the same.

𝐻𝑎 : Annual energy costs differ for the two brands of freezers.

• First, rank the combined data from the lowest to the highest values, with tied values being
assigned the average of the tied rankings.

• Then, compute 𝑊, the sum of the ranks for the first sample.

• Then, compare the observed value of 𝑊 to the sampling distribution of 𝑊 for identical
populations. The value of the standardized test statistic 𝑧 will provide the basis for deciding
whether to reject 𝐻0 .

Sampling Distribution of 𝑊 with Identical Populations

1
Mean: mw = n1 ( n1 + n2 + 1)
2
Standard Deviation:

Distribution Form:
Sampling Distribution of 𝑊 with Identical Populations

Rejection Rule

Test Statistic

𝑝-value

Conclusion

Do not reject 𝐻0 . The 𝑝-value > a. There is insufficient evidence in the sample data to conclude that
there is a difference in the annual energy cost associated with the two brands of freezers.
Kruskal-Wallis Test

The Mann-Whitney-Wilcoxon test has been extended by Kruskal and Wallis for cases of three or
more populations.

𝐻0 : All populations are identical

𝐻𝑎 : Not all populations are identical

• The Kruskal-Wallis test can be used with ordinal data as well as with interval or ratio data.

• Also, the Kruskal-Wallis test does not require the assumption of normally distributed
populations.

Test Statistic

where:

𝑘 = number of populations

𝑛𝑖 = number of observations in sample 𝑖

𝑛 𝑇 = 𝑆𝑛𝑖 = total number of observations in all samples

𝑅𝑖 = sum of the ranks for sample 𝑖

• When the populations are identical, the sampling distribution of the test statistic 𝐻 can be
approximated by a chi-square distribution with 𝑘 – 1 degrees of freedom.

• This approximation is acceptable if each of the sample sizes 𝑛𝑖 > 5.

• This test is always expressed as an upper-tailed test.

• The rejection rule is: Reject 𝐻0 if 𝑝-value < 𝛼.

Example: Lakewood High School

John Norr, Director of Athletics at Lakewood High School, is curious about whether a student’s total
number of absences in four years of high school is the same for students participating in no varsity
sport, one varsity sport, and two varsity sports.

Number of absences data were available for 20 recent graduates and are listed on the next slide.
Test whether the three populations are identical in terms of number of absences. Use a = 0.10.
Conclusion

Do no reject 𝐻0 . There is insufficient evidence to conclude that the populations are not identical. (𝐻
= 0.3532 < 4.60517)
Rank Correlation

• The Pearson correlation coefficient, 𝑟, is a measure of the linear association between two
variables for which interval or ratio data are available.

• The Spearman rank-correlation coefficient, 𝑟𝑠 , is a measure of association between two

• Values of 𝑟𝑠 can range from –1 to +1, where

• values near 1 indicate a strong positive association between the rankings, and

• values near – 1 indicate a strong negative association between the rankings.

Spearman Rank-Correlation Coefficient, 𝑟𝑠

where:

𝑛 = number of observations being ranked

𝑥𝑖 = rank of observation 𝑖 with respect to the first variable

𝑦𝑖 = rank of observation 𝑖 with respect to the second variable

𝑑𝑖 = 𝑥𝑖 − 𝑦𝑖

We may want to use sample results to make an inference about the population rank correlation ps.

To do so, we must test the hypotheses:

Mean:

Standard Deviation:

Distribution Form:

Example: Crennor Investors

Crennor Investors provides a portfolio management service for its clients. Two of Crennor’s analysts
ranked ten investments as shown on the next slide. Use rank correlation, with a = 0.10, to comment
on the agreement of the two analysts’ rankings.
Analysts’ Rankings are shown in the table.

Hypotheses

Sampling Distribution of 𝑟𝑠 Assuming No Rank Correlation

𝑝-value

Conclusion

Do no reject 𝐻0 . The 𝑝-value > 𝛼. There is not a significant rank correlation. The two analysts are not
showing agreement in their ranking of the risk associated with the different investments.