Republic of the Philippines

President Ramon Magsaysay State University

(Formerly Ramon Magsaysay Technological University)
Iba, Zambales, Philippines
Tel/Fax No.: (047) 811-1683

College/ Department College of Accountancy and Business

Administration
Course Code MTN 9
Course Title Statistics for Research
Place of the Course in the
Program
Semester & Academic Year 2nd Semester, AY 2020 – 2021

Introduction
Hypothesis testing was introduced by Sir Ronald Fisher (1890 – 1962),
Jerzy Newman (1894 – 1981), Karl Pearson (1857 – 1936) and Egon Pearson (Karl
Pearson’s son). Hypothesis testing is a statistical method that is used in making
statistical decisions using experimental data. Hypothesis testing is basically an
assumption that we make about the population parameter. There are three
methods used to test hypothesis by traditional method, p – value method, or by
confidence interval method.
The traditional method will be discussed initially which is the most widely
used especially in statistics books and instructional manuals. The p – value
method becomes popular since the advent of modern computer and high -
powered statistical software’s. The confidence interval is explained after the p -
value and some illustrative examples were discussed to its relationships with
hypothesis testing.

Intended Learning Outcomes

At the end of the module the students are expected to:

1. Understand the terms used in hypothesis testing.

2. Differentiate the methods of the hypothesis testing traditional method, p –
value and confidence interval.
3. State the null (H0) and alternative hypotheses (H1).
4. Compare and contrast one – tailed test and two – tailed test.
5. Find the critical values for the z and t test.
6. State the steps used in hypothesis testing
7. Test means for large samples, by means of z test.
8. Test means for small samples, by means of t test.
9. Test proportions, using the z test.
10.Test the hypothesis, using p – value.
11.Test the hypothesis, using confidence level.

Discussion
I. Procedure in Hypothesis Testing
All hypothesis testing situations start with stating the statistical hypothesis. A
statistical hypothesis is a conjecture about the population parameter. This
conjecture may or may not be true. There are two types of statistical
hypotheses: the null hypothesis and alternative hypothesis.

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Module 7A: Hypothesis Testing
 A. Two Types of Statistical Hypotheses
 Null Hypothesis, symbolized by H 0, is a statistical hypothesis testing
that assumes that the observation is due to a chance factor. In
hypothesis testing, null hypothesis is denoted by; H0: μ1 = μ2, which
shows that there is no difference between the two population
means (or parameters).
 Alternative Hypothesis, symbolized by H 1, is the opposite of the null
hypothesis; it shows that observations are the result of real effect. It
states that there is a difference between two population means (or
parameter).

B. Level of Significance
In hypothesis testing, the level of significance refers to the degree of
significance in which we accept or reject the null hypothesis. In hypothesis
testing, 100% accuracy is not possible for accepting or rejecting a null
hypothesis. So, we therefore select a level of significance that is usually 1% and
5%. Level of significance is the maximum probability of committing a Type I
error. That is, P(Type I error) = α . This probability is symbolized by α (Greek
letter alpha).
After the significance level is chosen, a critical value is selected from a table
for the appropriate test statistic. The critical value determines the critical and
noncritical regions. The critical value is a value that separates the critical region
from the non-critical region. The critical value or rejection region is the range of
the values of the test value that indicates that there is significant difference and
that the null hypothesis (H0) should be rejected. On the contrary, noncritical or
nonrejection region is the range of the values of the test value that indicates that
the difference was probably due to chance and that the null hypothesis (H 0)
should be rejected.

C. One – tailed versus Two – tailed test

A one – tailed test shows that the null hypothesis be rejected when the test value
is in the critical region on one side of the mean. It may either a right – tailed or
left – tailed test, depending on the direction of the inequality of the alternative
hypothesis. On the other hand, a two – tailed test, the null hypothesis should be
rejected when the test value is in either of the two critical regions. The table
below shows the relationship between signs in hypothesis and the tails of the
test.
Two – tailed Left – tailed test Right – tailed test
test
Signs in the H0 H0: μ = k H0: μ = k or H0: μ ≥ H0 = μ = k or H0: μ
k ≤k
Signs in the H1 H1: μ ≠ k H1: μ < k H1: μ > k
Rejection Region In both tails In the left tail In the right tail
*where k represent a specified number

Another table below represents some common phrases that are used in
hypotheses, conjunctures, and its corresponding symbols. The table served as a
guide in translating verbal conjunctures into mathematical symbols or
representations.
Is equal to Is not equal to
= Is the same as ≠ Is not the same
Is exactly the same as Is different from

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Module 7A: Hypothesis Testing
 Is increased Is decreased
> Is greater than < Is less than
Is higher than Is lower than
Is at least Is at most
≥ Is not less than ≤ Is not more than
Is greater than or equal Is less than or
to equal to
D. The Critical Value Approach to Hypothesis Testing
The observed value of the statistic (sample observation) is compared to
critical values (population observation). These critical values are expressed as
standard z values.

Illustration of Critical
Values for α = 0.05

Possible Outcome of a Hypothesis Test

Statistical Decision H0 True H0 False
Correct decision Confidence = 1 - Type II error
Do not reject H0
α P(Type II error) = β
Type I error Correct decision
Reject H0
P(Type I error) = α Power = 1 - β

A Type I error occurs if one rejects the null hypothesis when it is true. In
hypothesis testing, Type I error is denoted by alpha ( α ). In hypothesis testing,
the normal curve that shows the critical region is called the alpha region.
A Type II error occurs if one does not reject the null hypothesis when it is
false. In hypothesis testing, the normal curve that shows the acceptance region
is called the beta region.
The following are the steps in conducting a hypothesis testing:
1. State the null hypothesis (H0) and the alternative hypothesis (H 1).
2. Choose the level of significance, α , and the sample size.
3. Determine the test statistic and sampling distribution.
4. Determine the critical values that divide the rejection and nonrejection
regions.
5. Collect the data and compute the value of the test statistic.
6. Make a statistical decision.
7. State the conclusion.

II. Hypothesis Testing p – value

Usually, statistician test hypothesis at α level of 0.05 and 0.01 and
occasionally at 0.10. Remember that the level depends on the importance of the
Type I error.

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Module 7A: Hypothesis Testing
 The p – value (or probability value) is the probability of getting a sample
statistic or a mean extreme sample statistic in the direction of the H 1 when the
H0 is true. We cam also say that p – value is the actual area under the standard
normal distribution curve representing the probability of a particular sample
statistic or a more extreme sample occurring if the H 0 is true.
The p – value method for testing hypotheses differs from traditional method
in some parts. The steps for p – value method are:
1. State the null hypothesis (H0) and the alternative hypothesis (H 1).
2. Choose the level of significance, α , and the sample size.
3. Determine the test statistic and sampling distribution.
4. Compute the test value.
5. Determine the p – value.
6. Make a statistical decision.
7. State the conclusion.
There is a different approach in the decision rule when using p – value method.
 If p – value ≤ α , reject the H0, and if the p – value > α , do not reject the
H0.
There are also some important guidelines for p – values.
 If p – value ≤ 0.01, reject the H0, thus difference is highly significant.
 If p – value > 0.01 and p – value ≤ 0.05, reject the H 0, thus difference is
significant.
 If p – value > 0.05 and p – value ≤ 0.10, consider a consequence of
Type I error before rejecting the H0, thus difference is significant.
 If p – value > 0.10, do not reject the H 0, thus difference is not
significant.

III. Confidence Intervals and Hypothesis Testing

Another concept of hypothesis testing is the relationship between hypothesis
testing and confidence intervals. The relationship between confidence interval
and hypothesis testing can be summarized into two:
 When the confidence interval contains the hypothesized mean, do not
reject H0.
 When the confidence interval does not contain the hypothesized mean,
reject H0.
In general, when the H0 is not rejected, the confidence interval calculated
at the same significance level will contain the value of the mean that is stated in
the H0. On the contrary, when the H0 is rejected, the confidence interval
calculated at the same significance level will not contain the value of the mean
that is stated in the H0. These results are true for other hypothesis testing
situations and are not applicable to means test.

IV. One Sample z Test

The one sample z test is a statistical test for the mean of a population and
applicable to interval and ratio scale. It is used when n ≥ 30, or when the
population is normally distributed and population standard deviation is known.
The formula for the z test is
observed value−expected value
Test Value =
standard error
The observed value is the statistic (or the computed sample mean) obtain in
the sample data; while the expected value is the parameter (or the population
mean) that one would expect to obtain if the null hypothesis were true) or the
hypothesized value). The denominator represents the standard error of the
statistic being tested.

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Module 7A: Hypothesis Testing
 x−μ
z= Formula 7A – 1
σ /√n

x−μ
z= Formula 7A – 2
s/√n
where: z = one sample z test σ = population standard deviation
x = sample mean s = sample standard deviation
μ = population mean n = number of observation in the sample
The denominator σ / √ n or s/ √ n represents the standard error of the mean. The
term standard error of the mean may sound uncomfortable, but it is to be
interpreted in the same way as any other standard deviation. We could just as
well say “the standard deviation of the mean”. The important thing is that
standard error of the mean means the standard deviation of the sampling
distribution of the means.

Assumptions in One Sample z Test

1. Subjects are randomly selected.
2. Population distribution is normal.
3. The population should be known.
4. Cases of the samples should be independent.
5. Sample size should be greater than equal to 30.

Procedure for One Sample z Test

1. Set up the hypotheses: H0: μ = specified value H0: μ ≠, <, > specified
value
2. Set the level of significance and determine the critical value of z.
3. Calculate the sample mean for one sample z test by

x=
∑x where: x = sample mean n = number observation in
n
the sample
Note: Calculate the sample standard deviation if σ is unknown.
4. Calculate the value of the one sample z test by using the Formula 7A – 1 if
σ is known, otherwise use Formula 7A – 2.
5. Statistical decision for hypothesis testing
If z computed < z critical, do not reject H0.
If z computed ≥ z critical, reject H0.
6. State the conclusion.

Example 1: A researcher reports that the average salary of College Deans is

more than Php. 63, 000. A sample of 35 College Deans has a mean salary of Php
65, 700. At α = 0.01, test the claim that the College Deans earn more than Php.
63, 000. The standard deviation of the population is Php. 5, 250.
Solution:
Given x = Php. 65, 700 μ = Php. 63, 000 σ = Php. 5, 250 n = 35
1. Set up the hypotheses and identify the claim:
H0: μ ≤ Php. 63, 000 H0: μ > Php. 63, 000 (the claim)
2. The level of significance is at α = 0.01.
3. The z critical value is 2. 33 (it is one – tailed test, since it does mention
about the direction of the distribution)
Level of Significance
Test Type 0.10 0.05 0.025 0.01
±2.3
One-tailed Test ±1.28 ±1.645 ±1.96
3
±1.64 ±2.5 5|Page
Two-tailed Test ±1.96 ±2.33
Module 7A: Hypothesis Testing 5 8
 Note: We can obtain the critical z value using the table above.
4. Calculate the value of the one sample z test by using the Formula 7A – 1
x−μ 65 ,700−63 , 000
z= = = 3.043
σ /√n 5 , 250/ √ 35
5. Statistical decision for hypothesis testing
Reject the null hypothesis at α = 0.01, since 3.043 > 2.33
6. State the conclusion.
Since we reject the null hypothesis, we can conclude that there is enough
evidence to support the claim that the monthly salary of College Deans is
more than Php. 63, 000.

V. One Sample t – Test

One Sample t – Test is a statistical procedure that is used to know the mean
difference between the sample and the known value of population mean based
from an interval or ratio scale. We draw a random sample from the population
and then compare the sample mean with the population mean and make a
statistical decision as to whether or not the sample mean is different from the
population. The sample size should be less than 30.

Assumptions in one Sample t – Test

1. The population must be approximately normally distributed.
2. Samples drawn from the population should be random.
3. Cases of the samples should be independent.
4. Sample size should be less than 30.
5. The population mean should be known.

Procedure for One Sample t – Test

1. Set up the hypotheses: H0: μ = specified value H0: μ ≠, <, > specified
value
2. Set the level of significance, calculate the degrees of freedom (df = n – 1)
and determine the critical value of t.
3. Calculate the sample mean and sample standard deviation for one sample
t – test by using

x=
∑x
n
s=
√ ∑ (x−x )2
n−1
where: x = sample mean
s = sample standard deviation
n = number observation in the sample
4. Calculate the value of the one sample t test by using
x−μ
t= Formula 7A – 3
s/√n
where: t = one sample t – test
x = sample mean
μ= population mean
s = sample standard deviation
n = number observation in the sample
5. Statistical decision for hypothesis testing

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Module 7A: Hypothesis Testing
 If t computed < t critical, do not reject H0.
If t computed ≥ t critical, reject H0.
6. State the conclusion.

Example 2: One of the undersecretaries of the Department of Labor and

Employment (DOLE) claims that the average salary of civil engineer is Php. 18,
000. A sample of 19 civil engineer’s salary has a mean of Php. 17, 350 and a
standard deviation of Php. 1, 230. Is there enough evidence to reject the
undersecretary’s claim at α = 0.01?
Solution:
Given x = Php. 17, 350 μ = Php. 18, 000 σ = Php. 1, 230 n = 19

1. Set up the hypotheses and identify the claim:

H0: μ = Php. 18, 000 I(claim) H0: μ ≠ Php. 18, 000
2. The level of significance is at α = 0.01 and df = n – 1 = 19 – 1 = 18
3. The t critical value is ± 2. 878 (it is a two – tailed test, since it does not
mention about the direction of the distribution)

4. Calculate the value of the one sample t test by using

x−μ 17 ,350−18 , 000
t= = = - 2.303
s/√n 1 , 230/ √ 19
5. Statistical decision for hypothesis testing

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Module 7A: Hypothesis Testing
 Do not reject the null hypothesis at α = 0.01, since -2.303 > -2.878
6. State the conclusion.
Since we fail to reject the null hypothesis, we can conclude that the
starting salary of civil engineers is Php. 18, 000.

VI. z Test for Proportion

A lot of hypothesis testing situations involve proportions (proportion is the
same as a percentage of the population). This test can be considered as a
binomial experiment when there are only two outcomes and the probability of
success does not change from trial to trial (the outcomes of each trial are
independent). Given that a normal distribution can be used to approximate the
binomial distribution when np ≥ 5 and nq ≥ 5, the standard deviation can be
used to test the hypotheses for proportions.
p^ − p
z= Formula 7A – 4
√ pq /n
where: z = z test for a proportion
^p = sample proportion (x/n)
p = population proportion
n = number of observations in the sample
q=1–p

Assumptions in z test for Proportion

1. Subjects are randomly selected.
2. Population distribution is normal.
3. Observations are dichotomous.

Procedure for z test for a Proportion:

1. Set up the hypotheses: H0: p = specified value H0: p ≠, <, > specified
value
2. Set the level of significance and determine the critical value of z.
3. Calculate the sample proportion.
4. Calculate the value of the one sample z test for proportion by using the
Formula 7A – 4.
5. Statistical decision for hypothesis testing
If z computed < z critical, do not reject H0.
If z computed ≥ z critical, reject H0.
6. State the conclusion.

Example 3: A recent survey done by Philippine Housing Authority found that 35%
of the population owns their homes. In a random sample of 240 heads of
households, 78 responded that they owned their homes. At the 0.01 level of
significance, does that indicate a difference from the national proportion?
Solution:
Given: x = 78 n = 240 p = 35% = 0.35

1. Set up the hypotheses: H0: p = 0.35 (claim) H0: p ≠ 0.35

2. the level of significance is at α = 0.01.
3. The z critical value is ±2.58 (it is two – tailed test).
Level of Significance
Test Type 0.10 0.05 0.025 0.01
±2.3
One-tailed Test ±1.28 ±1.645 ±1.96
3
±1.64 ±2.5
Two-tailed Test ±1.96 ±2.33
5 8
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Module 7A: Hypothesis Testing
 4. Compute the test value. First, it is necessary to solve for ^p
x 78
^p= = = 0.325 and p = 0.35 and q = 1 – p = 1 – 0.35 = 0.65
n 240
^p − p 0.325−0.35
z= = = -0.812
√ pq / n √ 0.35(0.650)/240
5. Statistical decision for hypothesis testing.
Do not reject the null hypothesis, since the test value falls outside the
critical region.

6. State the conclusion.

Since we fail to reject the null hypothesis, we can conclude that there is
not enough evidence to reject the claim that 35% of the Filipinos owned
their homes.

Exercises
Answer the following. Show your complete solution.
1. A researcher claims that 20-year-old women on a special diet will have an
average weight of 110 pounds. A sample of 15 women has an average
weight of 112.5 pounds and a standard deviation of 5 pounds. At α = 0.01,
can the claim be rejected? Also, find the 99% confidence interval of the
true mean. (20pts)

Resources and Additional Resources

Alamil, L. R., Antivola, H. M. & Rayel, J. J. 2015. Business Statistics: A Modular
Approach.
Books Atbp. Publishing Corp. Mandaluyong City.

Reyes, C. Z. & Saren, L. L. 2007. Elementary Statistics text/ Workbook. National

Bookstore. Metro Manila

Sirug, W. S. 2015. Introduction to Business Statistics A Comprehensive Approach

A
Revised Edition. Mindshapers Co., Inc, Manila.

Prepared by:

GENE A. PERALTA, LPT., MBA

Instructor I

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Module 7A: Hypothesis Testing