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Hypothesis Testing

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10 views19 pages

Hypothesis Testing

Uploaded by

yaminis.0223
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Hypothesis Testing

Dr. Durba Chakrabarty


ITM BUSINESS SCHOOL
PGDM 2023-2025
Hypothesis Testing

► In statistics, a hypothesis is a claim or statement about a


property of a population.
► A hypothesis test (or test of significance) is a standard
procedure for testing a claim about a property of a
population.
► Hypothesis testing can be used to determine whether a
statement about the value of a population parameter
should or should not be rejected.
Null & Alternative Hypothesis

► The null hypothesis, denoted by H0 , is a tentative


assumption about a population parameter.
► The alternative hypothesis, denoted by Ha, is the
opposite of what is stated in the null hypothesis.
► The hypothesis testing procedure uses data from a
sample to test the two competing statements indicated
by H0 and Ha.
Examples of Developing Null and Alternative Hypotheses

Alternative Hypothesis as a Research Hypothesis

Example:
A new teaching method is developed that is believed to be
better than the current method.

Alternative Hypothesis:
The new teaching method is better.

Null Hypothesis:
The new method is no better than the old method.
Examples of Developing Null and Alternative Hypotheses

Alternative Hypothesis as a Research Hypothesis

Example:
A new sales force bonus plan is developed in an attempt to
increase sales.

Alternative Hypothesis:
The new bonus plan increase sales.

Null Hypothesis:
The new bonus plan does not increase sales.
Summary of Forms for Null and Alternative Hypotheses
about a Population Mean

► The equality part of the hypotheses always appears in the null


hypothesis.
► In general, a hypothesis test about the value of a population
mean must take one of the following three forms (where μ0 is
the hypothesized value of the population mean).

One-tailed One-tailed Two-tailed


(lower-tail) (upper-tail)
Type I Error & Type II Error

►Because hypothesis tests are based on sample


data, we must allow for the possibility of errors.
►A Type I error is rejecting H0 when it is true.
►The probability of making a Type I error when the null
hypothesis is true as an equality is called the level of
significance.
►A Type II error is accepting H0 when it is false.
►Statisticians avoid the risk of making a Type II error by
using “do not reject H0” and not “accept H0”.
Power of the test

►β ≡ probability of a Type II error


►1 – β = “Power” ≡ probability of avoiding a Type II
error
1– β = Pr(reject H0 | H0 false)
Type I and Type II Errors
Population Condition

H0 True H0 False
Conclusion

Correct
Accept H0 Type II Error
Decision

Correct
Reject H0 Type I Error Decision
Reject or Fail To Reject?

► There are various decision criteria we will use to


decide to reject or fail to reject the null
hypothesis:
► Traditional method
► P-value method
► Confidence intervals
Test Statistic

►The test statistic is a value used in making a


decision about the null hypothesis and is found by
converting the sample statistic to a score with
the assumption that the null hypothesis is true.
►The test statistic measures how close the sample
has come to the null hypothesis.
►The test statistic often follows a well-known
distribution (eg, normal, t, or chi-square,
standard normal).
Test Statistic - Formulas
Test statistic for
proportion

Test statistic
for mean

Test statistic for


standard deviation
Critical Region & Significance Level

► The critical region (or rejection region) is the set of all


values of the test statistic that cause us to reject the null
hypothesis
► The significance level (denoted by α) is the probability
that the test statistic will fall in the critical region when
the null hypothesis is actually true. Common choices for α
are 0.05, 0.01, and 0.10.
Decision Criterion Comparing P-Value and
Significance Level

►If P-value ≤ α , reject H0.

►If P-value > α , fail to reject H0.


Steps of Hypothesis Testing
Step 1. Develop the null and alternative hypotheses.
Step 2. Specify the level of significance α.
Step 3. Collect the sample data and compute the value of the test statistic.

p-Value Approach
Step 4. Use the value of the test statistic to compute the p-value.
Step 5. Reject H0 if p-value < α.
Steps of Hypothesis Testing
Critical Value Approach
Step 4. Use the level of significance α to determine the critical value
and the rejection rule.
Step 5. Use the value of the test statistic and the rejection rule to
determine whether to reject H0.
Two- Tailed Test at 5% Significance level
Two- Tailed Test at 10% Significance
level
Steps for Hypothesis Testing
Formulate H0 and H1

Select Appropriate Test


Choose Level of Significance

Calculate Test Statistic TSCAL

Determine Critical Value of


Determine Prob Test Stat
Assoc with Test Stat TSCR

Determine if TSCR
Compare with Level falls into (Non) Rejection
of Significance Region

Reject/Do not Reject H0

Draw Marketing Research Conclusion

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