Hypothesis Testing

Hypothesis: A hypothesis is some statement about a population which we want to verify

on the basis of information available from a sample.
Example: The mean monthly income for systems analysts is $6,325.

Hypothesis testing: A procedure based on sample evidence and probability theory to

determine the hypothesis is a reasonable statement and should not be rejected, or is
unreasonable and should be rejected.

Steps in solving testing of hypothesis: The major steps involved in a hypothesis testing
are outlined as follows:

Step 1: State null and alternate hypotheses

Step 2: Select a level of significance

Step 3: Identify the test statistic

Step 4: Formulate a decision rule

Step 5: Arrive at a decision

Reject null and accept alternative Reject alternative and accept null

Types of Hypotheses:
There are two types of hypothesis.
1. Null Hypothesis ( H 0 )
2. Alternative Hypothesis ( H 1 )
Null Hypothesis ( H 0 ): A statement about the value of a population parameter. That is a
null hypothesis is that statement which we want to reject. Null hypothesis denoted by H 0
For the above example the number 3 hypothesis is called hull hypothesis. That is there is
no difference between the two processes. Null hypothesis can be written as follows

H 0 : µ = µ0

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Alternative Hypothesis ( H 1 ): A statement that is accepted if the sample data provide
evidence that the null hypothesis is false. Alternative hypothesis is usually denoted
by H 1 .

Some important definitions:

Type I Error: Rejecting the null hypothesis when it is actually true.

Example: Suppose a person getting a positive result in a HIV test whether he is not HIV
positive.

Type II Error: Accepting the null hypothesis when it is actually false.

Example: Suppose a person getting negative result in HIV test whether he is HIV
positive.

Level of Significance: The probability of rejecting the null hypothesis when it is

actually true; i.e.the probability of type Ι error is called level of significance. It is denoted
as α .
α = Pr (Type Ι error )

Power of the test: The probability of Type II Error is defined as β .

That is β = Pr (Type II Error).Now (1- β ) is defined as the power of the test.

The difference between Type I Error and Type II Error given as below:

• Rejecting the null hypothesis when it is actually true is called type I error

On the other hand, accepting the null hypothesis when it is actually false is called
type II error.

• Type I error is known as false positive

On the other hand, Type II error is known as false negative.

• Type I error is more serious then type II error

Type II is less serious then type I error.

• The probability of type I error is called level of significance

On the other hand, if the probability of type II error is subtracted from 1 then that
term is called power of the test.

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Test statistic: A value, determined from sample information, used to determine
whether or not to reject the null hypothesis is called test statistic.
Example: There are many types of test statistic. As like, z test, t test, F test, χ 2 test etc.

Mean/Average test:
t- test: Testing for a Population Mean where sample size is small i.e less than 30,
and Population Standard Deviation Unknown. The test statistic is the t distribution is

X −µ
t=
s/ n
The critical value of t is determined by its degrees of freedom equal to n-1.

Assumptions for t-test:

1. When sample size is less than 30, we can use t-test.

2. The sample observation are independent that is sample is random
3. The population standard deviation is unknown.

Z-test: Test for the population mean from a large sample ( (n ≥ 30) . The Z statistics
is defined as
( X − µ) s
z= ; here σ =
σ n
so we can write
( X − µ)
z=
s
n
Here,
X is sample mean.
µ is population mean.
σ is population standard deviation.
s is sample standrad deviation.
n sample size.

Assumptions for z-test:

1. When sample size is greater than 30,we can use z-test

2. The population standard deviation is known

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Decision Rule
If Computed value < critical value then Null Hypothesis is accepted.i.e. Alternative
hypothesis is rejected

If Computed value > critical value then Null Hypothesis is rejected. i.e. Alternative
hypothesis is rejected

The Steps are included in t-test given as below:

Step 1
State the null and the alternative hypotheses that is we have to state.
H 0 : µ = µ 0 and H 1 : µ > µ 0 or
µ < µ 0 or
µ ≠ µ0
Step 2
Select the significance level.
Step 3
Calculate test statistic. Here we have to calculate z test.
Step 4
State the decision rule. That is

Re ject H 0 if t > t0 or -t < −t0

Or
Accept H 0 if t < t0 or -t > −t0
Step 5
Make a decision and interpret the results.
Example-1: A drug manufacturer has installed a machine which fills automatically 5
grms in each phile.Randomly 10 sample was taken and found to contain 5.02 grams
on an average in a phial. The Standard deviation of the sample was 0.002 grms.Test at
H :µ = 5
5% levels of significance, 0
H1 : µ ≠ 5

Sol:
Here the null and the alternative hypotheses are
H 0 : µ = 5 i.e. the adjustment in the machine is in order
H1 : µ ≠ 5 i.e. the adjustment in the machine is not in order
X −µ
Now the test statistic is: t =
s/ n
Here; =x 5.02,= µ 5,= s 0.002,= n 10
5.02 − 5
= = 31.62
0.002 10

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 α 5%
Here (n-1) =9, = = 0.025
2 2
From the t table, the tabulated value of t is, ttab = ± 2.262.
As, the calculated value is greater than the tabulated value, that is,
tcal =31.62> ttab =2.262.
So null hypothesis is rejected.
Hence, the adjustment in the machine is not in order.

Problem: The mean life time of a sample of 100 light tubes produced by a company
is found to be 1580 hours and the population standard deviation is 90 hours. Test the
hypothesis at the 5% level of significance that the mean of the tubes produced by the
company is 1550 hours.

Solution:

Here the null and the alternative hypotheses are

H 0 : µ = 1550
H 1 : µ ≠ 1550

Here given that 5 % level of significance. The tabulated value of z 0 is ± 1.96.

Here the test statistic is z.

So,
X − µ 1580 − 1550
=z = = 3.33
σ n 90 100

We know,
Re ject H 0 if z > z 0

Otherwise accept H 0

Here z = 3.33 and tabulated value z 0 is ± 1.96.

As 3.33>1.96 that is z > z 0 ,

So null hypothesis is rejected. Hence the mean life time of the tubes produced by the
company may not be 1550 hours.

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Variance test:

χ 2 -test: For testing the population variance σ 2 ,based on sample variance s 2 , χ 2

test is used. The text statistic is given as below:

χ n2−1 =
(n − 1)s 2
σ 2

Here s 2 is sample variance, σ 2 is population variance and degrees of freedom is

(n-1).

Assumptions:
1. The sample should contain at least contain 50 observations.
2. The sample observation should be independent of each other
3. It is use for variance test.

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