90156hypothesis Testing

Amity International Business School
HYPOTHESIS TESTING
Research is an academic activity
and comprises with:

Defining and redefining problems
Collecting, organizing and evaluation
data
Formulation of hypothesis
Testing hypothesis
Making deductions and reaching to
conclusions

Population vs. samples
Statistical analyses are based on a simple
model.

You want to extrapolate from the data you
have collected to make general conclusions.

There is a large population of data out there,
and you have randomly sampled parts of it.
You analyze your sample to make inferences
about the population.
Consider several situations:

Quality control
Sample: The items you tested.
Population: The entire batch of items
produced.

Political polls
Sample: The ones you polled.
Population: All voters.

Statistical inference is the act of generalizing
from a sample to a population with calculated
degree of certainty.

We want to
learn about
population
parameters

but we can
only calculate
sample
statistics

We are going to illustrate inferential concept by considering
how well a given sample mean x-bar reflects an underling
population mean

Testing for Statistical
Significance

State the Hypothesis
Choose the statistical test
Select the desired level of significance
Rejection/Critical Region
Interpret the test
Hypothesis
Hypotheses are tentative, intelligent guesses as to the
solution of the problem.

A hypothesis is an assumption about the population
parameter.
A parameter is a characteristic of the population,
like its mean or variance.

Goal:Make statement(s) regarding unknown
population parameter values based on sample
data

Types of Hypotheses
Null
that no statistically significant difference exists between
the parameter and the statistic being compared
Alternative
logical opposite of the null hypothesis
that a statistically significant difference does exist between
the parameter and the statistic being compared.

H
0
always contains =
H
A
matches the question asked; it is what were trying
to prove.

Various types of H
0
and H
A
Case

Null Hypothesis Alternate Hypothesis
H
0
H
A

1. =
0

0

2 . =
0
>
0

3 . =
0
<
0

0
is Hypothesised mean
Always the null hypothesis is tested, i.e.,
we want to either accept or reject the null
hypothesis because we have information
only for the null hypothesis.

Ho is taken as true and tested for its
possible rejection

Either H
0
or H
A
must be true, making the other
false.
ERRORS IN SAMPLING
Based on the data we have, we will make a decision,
e.g., whether means are different. In the population, the
means are really different or really the same. We will
decide if they are the same or different. We will be either
correct or mistaken.
Sample
decision
Ho is true Ho is false
Accept Ho Correct
Decision=1- o
Type II error.
P(Type II)=|
Reject Ho Type I error.
p(Type I)= o
Correct
Decision
Power=1-|
In the Population
Select a significance level
Select an appropriate significance level
(Type I error) typically alpha is used at the .05
or the .01 level.
In statistical analysis, Type I error is kept
constant (minimum) and then we try to control
Type II error.

A good researcher will also not neglect Type
II error.
Significance level gives the confidence
with which a researcher rejects or retain
the null hypothesis.
If we take 5% level of significance then
there are about 5 chances out of 100 that
we would reject the Null hypothesis when
it should be accepted or
that we are 95% confident about the right
decision
Two tailed test : Here the alternate hypothesis is
formulated to test for difference in either direction, i.e.,
for either an increase or a decrease in the random
variable. Hence the test statistic is tested for occurrence
within either of the two critical regions on the two
extremes of the distribution.

One sample test: For the lake example we need to know
if the mean concentration of the lake is the same as or
different from a specified value of 10 mg/L.
Hence, H0: m = 10 mg/L, vs, HA: m 10 mg/L.

Two sample test: In case we want to test whether the
population mean of the first sample (m1) is the same as
or different from the mean of the second sample (m2).
Hence H0: m1 = m2 , vs, HA: m1 m2.

Acceptance region and critical regions for two tailed test
in hypothesis testing
One tailed test : Here the alternate hypothesis is one-
sided and we test whether the test statistic falls in the
critical region on only one side of the distribution.

One sample test: For example, we are measuring the
concentration of a lake and we need to know if the mean
concentration of the lake is greater than a specified
value of 10mg/L.
Hence, H0: m = 10 mg/L, vs, HA: m > 10 mg/L.

Two sample test:In case we want to test whether the
population mean of the first sample is lesser than that of
the second sample.
Hence, H0: m1 = m2 , vs, HA: m1 < m2.

One-sided hypothesis where the critical region lies in the
right tail
One-sided hypothesis where the critical region lies in the
left tail
Given the same level of significance the
two tailed test is more conservative, i.e., it
is more rigorous than the one-tailed test
because the rejection point is farther out in
the tail. It is more difficult to reject H0 with
a two-tailed test than with a one-tailed test.
Select an Appropriate Test
To test the Null Hypothesis, select an
appropriate statistical technique.
If the null hypothesis is defined by the
parameter , then the statistics computed
on our data set would be the mean (xbar)
and the standard deviation (s).

Univariate
Techniques
Parametric Test
One
Sampl
e
t test
Z test
Two or
More
Samples
Independent
t test
Z test
One way
ANOVA
Related
Paired t
test
Nonparametric Test
One Sample
Frequency
Chi-square
K-S
Runs
Binomial
Two or
More
Samples
Independen
t
Chi-
Square
Median
Related
Chi-
Square
Sign
Classes of Significance Tests
Parametric tests
Z or t test is used to determine the statistical
significance between a sample distribution
mean and a population parameter
Assumptions:
independent observations
normal distributions
populations have equal variances
scale data

Classes of Significance Tests
Nonparametric tests
Chi-square test is used for situations in which a
test for differences between samples is required
Assumptions
independent observations for some tests
normal distribution not necessary
homogeneity of variance not necessary
appropriate for nominal and ordinal data, may be
used for interval or ratio data

Analysis of variance (ANOVA)
the statistical method for testing the null
hypothesis that means of several
populations are equal

Multiple Comparison Tests
Multiple comparison procedures
test the difference between each pair of
means and indicate significantly different
group means at a specified alpha level (<.05)
use group means and incorporate the MS
error

term of the F ratio

How to Select a Test
Which does the test involve?
one sample,
two samples
k samples
If two or k samples,are the individual
cases independent or related?
Is the measurement scale nominal,
ordinal, interval, or ratio?


To determine where our sample mean fits
on this sampling distribution, we convert
our sample mean, xbar, to a z-
score. Thus the test statistic would be :

z = xbar- (hypothesized)
standard error of xbar

CRITICAL/REJECTION REGION
It depends upon
Level of significance
Alternative Hypothesis
CONCLUSION
If statistic falls in acceptance region
Accept Ho

If statistic falls in acceptance region
Reject Ho i.e.,accept H
A

Example - Efficacy Test for New drug
Drug company has new drug, wishes to
compare it with current standard treatment
Federal regulators tell company that they
must demonstrate that new drug is better
than current treatment to receive approval
Firm runs clinical trial where some patients
receive new drug, and others receive
standard treatment
Numeric response of therapeutic effect is
obtained (higher scores are better).
Parameter of interest:
New
-
Std

Example - Efficacy Test for New drug
Null hypothesis - New drug is no better than standard trt
Alternative hypothesis - New drug is better than standard trt
0 : >
Std New A
H
Experimental (Sample) data:
Std New
Std New
Std New
n n
s s
y y
H
o
:
New
=
Std
Sampling Distribution of Difference in Means
In large samples, the difference in two sample means
is approximately normally distributed:
|
|
.
|
\
|
+
2
2
2
1
2
1
2 1
2 1 , ~
n n
N Y Y
o o

Under the null hypothesis,
1
-
2
=0 and:
) 1 , 0 ( ~
2
2
2
1
2
1
2 1
N
n n
Y Y
Z
o o
+
=
o
1
2
and o
2
2
are unknown and estimated by s
1
2
and s
2
2
Type I error - Concluding that the new drug is better than
the standard (H
A
) when in fact it is no better (H
0
). Ineffective
drug is deemed better.
Traditionally o = P(Type I error) = 0.05

Type II error - Failing to conclude that the new drug is
better (H
A
) when in fact it is. Effective drug is deemed to be
no better.
Traditionally a clinically important difference (A) is
assigned and sample sizes chosen so that:
| = P(Type II error |
1
-
2
= A) s .20

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