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Lecture-3_-Testing-hypothesis

The lecture discusses hypothesis testing in statistics, focusing on null and alternative hypotheses, significance levels, and types of errors. It outlines methods for testing hypotheses, including critical value, confidence interval, and p-value methods, as well as testing multiple linear restrictions and overall significance of regression models. Key concepts such as t-distribution, F-tests, and the implications of rejecting or not rejecting the null hypothesis are also covered.

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Ngoc Anh
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19 views19 pages

Lecture-3_-Testing-hypothesis

The lecture discusses hypothesis testing in statistics, focusing on null and alternative hypotheses, significance levels, and types of errors. It outlines methods for testing hypotheses, including critical value, confidence interval, and p-value methods, as well as testing multiple linear restrictions and overall significance of regression models. Key concepts such as t-distribution, F-tests, and the implications of rejecting or not rejecting the null hypothesis are also covered.

Uploaded by

Ngoc Anh
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Lecture 3

Hypothesis Test

Đinh Thị Thanh Bình, PhD


Faculty of International Economics, FTU

1
Testing hypothesis in Statistics - Revise

• We have hypothesis that the average GPA of the


students = 7.5. To test this hypothesis:

H0: µ = 7.5
H1: µ ≠ 7.5
In which
• µ: the average GPA in the population
• H0 : null hypothesis
• H1 : alternative hypothesis

2
Statistical decision

Do not reject
Reject H0
H0
True state of the null hypothesis

Correct Type II error


H0 False

Type I error Correct


H0 True

3
• α : significance level
Highest probability accepted to get mistake type I

P(mistake type I) = P(reject H0/H0 right) ≤ α

• If there is evidence to reject H0, we say: reject H0,


accept H1

4
Testing hypothesis about the regression parameter
• 3 kinds of hypothesis test
- 2-sided:  H 0 :  j =  *j

H
 1 j :    *
j

- right-sided:  H 0 :  j   *j

 H1 :  j   j
*

 H 0 :  j   *j
- left-sided: 
 H1 :  j   j
*

5
Sampling distributions of the OLS
estimators
Assumption 7: The population error u is independent of
the explanatory variables X and normally distributed:
𝑢~𝑁(0, 2 )

Theorem 4.1: Normal sampling distribution


෢𝑗 ~N(𝑗 , var 
෢𝑗 )

6
Sampling distributions of the OLS
estimators

Theorem 4.2: (t distribution for the standardized


estimators)
Under assumptions,
(  −  *) / se(  ) t n − k −1
j j j

k is the number of independent variables

7
3 methods to test hypothesis
 Critical value (t test)
 p- value
 Confidence interval

Necessary statistics

• T statistics/ T ratio
• Significance level 
• Confidence interval (1 −  )
• Critical value: tα, n-k-1

8
1. Critical value method (t test)
ˆ j −  * j
• Step 1: Calculate ts =
se( ˆ j )

• Step 2: Check the Table t-student for the critical value

• Step 3: Compare ts with the critical value

9
Rules of rejection

Hypothesis H0 H1 Rejection area


of H0
 =  #
* *
2 - sided j j j j
ts > tα, n-k-1

   
* *
Right - sided j j j j
ts > tα, n-k-1

   
* *

Left -sided j j j j ts < -tα, n-k-1

10
2. Confidence Interval Method

2-sided confidence interval


•Define the critical value so that:
P(-tα/2, n-k-1< ts< tα/2, n-k-1) = 1-α

• The probability that the following random interval


contains the population βj is (1 −  )

(
෢𝑗 − 𝑡α/2,𝑛−𝑘−1 𝑠𝑒(
෢𝑗 ); 
෢𝑗 + 𝑡α/2,𝑛−𝑘−1 𝑠𝑒(
෢𝑗 ))

11
right-side confidence interval

෢𝑗 − 𝑡α,𝑛−𝑘−1 𝑠𝑒(
( ෢𝑗 ),+∞)

left-side confidence interval


(-∞, 
෢𝑗 + 𝑡α,𝑛−𝑘−1 𝑠𝑒(
෢𝑗 ))

12
Rejection rules for hypothesis H0
• 2-sided test: if  does not lie within this interval, we
*
j
reject H0.

(
෢𝑗 − 𝑡α/2,𝑛−𝑘−1 𝑠𝑒(
෢𝑗 ); 
෢𝑗 + 𝑡α/2,𝑛−𝑘−1 𝑠𝑒(
෢𝑗 ))

 *
• Right-sided test: if j does not lie within this interval,
we reject H0.
෢𝑗 − 𝑡α,𝑛−𝑘−1 𝑠𝑒(
( ෢𝑗 ),+∞)

 *
• Left-sided test: if j does not lie within this interval,
we reject H0.
(-∞, 
෢𝑗 + 𝑡α,𝑛−𝑘−1 𝑠𝑒(
෢𝑗 ))
13
3. p-value method

• Step 1: Calculate ˆ j −  *j
t0 =
se( ˆ j )
• Step 2: Calculate p-value = P(| ts | t0 ) of which T is
a random variable that has t-student distribution
with (n-k-1) degree of freedom. t0 is a specific
value of ts
• Step 3: with a given significance level α, rule of
rejection is:
• 2-sided test: p-value < α ➔ reject H0
• one-sided test: p-value/2 < α ➔ reject H0

14
4. Testing Multiple Linear Restrictions

• (UR) : Y =  0 + 1 X 1 + ... +  k X k + u (Unrestricted model)

• (R) : Y =  0 + 1 X 1 + ... +  k −q X k −q + v (Restricted model)

→ q independent variable excluded from the model

H0 : βk-q+1 =…= βk = 0
H1 : at least one βj ≠ 0

15
Steps
• Step 1 : Calculate SSRUR, the sum of squared residuals
from the unrestricted model
• Step 2 : Calculate SSRR, the sum of squared residuals
from the restricted model
• Step 3 : F-statistic or F ratio :

Fs =
(𝑆𝑆𝑅𝑟 −𝑆𝑆𝑅𝑢𝑟 )/𝑞
𝑆𝑆𝑅𝑢𝑟 /(𝑛−𝑘−1)
~F(q, n-k-1)

2 −𝑅 2 )/𝑞
Fs = (𝑅𝑢𝑟 𝑟
2 )/(𝑛−𝑘−1) ~ F(q, n-k-1)
(1−𝑅𝑢𝑟

16
Check for the critical value F(q, n-k-1)

If Fs  F ( q, n − k − 1) ➔ reject H0

This is called F test or Wald test

17
5. Testing overall significance of a regression
H0 : β1 = β2 …= βk = 0
H1 : at least βj ≠ 0

H0 : R2 = 0 ↔ H0 : β1 = β2 =…= βk = 0
H1 : R2 ≠ 0 ↔ H1 : at least one βj ≠ 0

R2 / k
Fs = F (k , n − k − 1)
(1 − R 2 ) / ( n − k − 1)

If Fs  F ( k , n − k − 1) ➔ reject H0.

18
6. Testing for the fitness of the model
H0 : R2 = 0 ↔ H0 : β1 = β2 =…= βk = 0
H1 : R2 ≠ 0 ↔ H1 : has at least one βj ≠ 0

• Independent variables don’t simultaneously affect the


dependent variable → Sample regression function can’t
explain for the variation of dependent variable → SRF is
not suitable.
➔ Same as: F tests for all regression parameters

• Note: Hypothesis H0: β1 = 0 and H0: β2 = 0 (separate


testing) is not the same as H0: β1 = β2 = 0 (simultaneous
testing)
19

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