INTRODUCTION TO HYPOTHESIS TESTING

10.1 HYPOTHESIS TESTING

Hypothesis testing is the operation of
deciding whether or not a data set obtained for a
random sample supports or fails to support a
particular hypothesis. A hypothesis is an
assertion or conjecture about a parameter(s) of a
population; it may also concern with the type,
nature of the population, or distributional form of
characteristics of interest.
STEPS IN HYPOTHESIS TESTING BY THE CRITICAL
VALUE APPROACH
1)
Formulate the null hypothesis and the
alternative hypothesis.
2)
Set the level of significance of size .
3)
Select the appropriate test statistic.
4)
Establish the critical region.
5)
Compute the value of the test statistic.
6)
Decision:
Reject Ho if the value of test statistic belongs
to the critical region.
Do not reject Ho if the value of the test
statistics does not belong to the critical
region.
7)
Conclusion.
STEPS IN HYPOTHESIS TESTING BY THE P-VALUE
APPROACH
A p-value is the smallest significance level at
which a null hypothesis may be rejected.
1)
Formulate the null hypothesis and the
alternative hypothesis.
2)
Set the level of significance of size .
3)
Select the appropriate test statistic.
4)
Compute the value of the test statistic.
5)
Determine the pvalue of the test
statistic.
6)
Decision:
Reject Ho if the pvalue is less than .
Do not reject Ho if the pvalue is greater (or
equal) than .
7)
Conclusion.
10.2 TYPES OF HYPOTHESES
A. Null hypothesis,

H0

represents a theory

that has been put forward, either because it is

believed to be true or because it is used as a
basis for argument. This assertion is held as true
until there is sufficient statistical evidence to
conclude otherwise. It states that there is no
difference between a parameter(s) and a specific
value.
B. Alternative hypothesis,

HA

or

H1

an assertion of all situations not covered by the

null hypothesis. It states that there is a precise

difference between a parameter(s) and a specific

value.
EXAMPLES:
State the null hypothesis and the alternative
hypothesis to be used. (Note: The equal sign must
be in the null hypothesis, regardless of the
statement.)
1. New software is being integrated into the
teaching of a course with the hope that it will help
to improve the overall average score for this
course. The historical average score for this
course is 72.
2. A real estate agent claims that the average
price for homes in a certain subdivision is
$150,000. You believe that the average price is
lower. You plan to test his claim by taking a
random sample of the prices of the homes in the
subdivision; formulate the set of hypotheses.
3. An advertisement on the TV claims that a
certain brand of tire has an average lifetime of
50,000 miles. Suppose you plan to test this claim
by taking a sample of tires and putting them on
test. What is the correct set of hypotheses to set
up?
10.3 POSSIBLE OUTCOMES OF A
HYPOTHESIS TEST
True state of the null
Statistical
hypothesis
Decision
Ho is true
Ho is false
ERROR
Correct
Reject Ho
Type I
decision
Do not reject
Correct
ERROR
Ho
decision
Type II
- probability of committing a type I error
- area of the critical region
- also called the level of significance
- probability of committing a type II error
Notes:

A type I error will be committed when the

true null hypothesis is rejected.

A type II error is committed when a false

null hypothesis is not rejected.
10.4 TYPES OF TEST
A. One tailed test:
hypothesis where the
one-sided.
(Ha: > or <)
B. Two tailed test:
hypothesis where the
two-sided. (Ha: )

A test of any statistical

alternative hypothesis is
A test of any statistical
alternative hypothesis is

10.5 DEFINITION OF SOME TERMS

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INTRODUCTION TO HYPOTHESIS TESTING

Test statistic a sample statistic computed

from the data. The value of the test statistic is
used in determining whether or not the null
hypothesis is rejected.
Critical or rejection region a range of test
statistic values for which the null hypothesis
should be rejected. This range of values will
indicate that there is a significant or large

enough difference between the hypothesized

parameter value and the corresponding point
estimate for the parameter.
Critical value first value in the critical region.
The set of values that are not in the critical
region is called the region of acceptance
(noncritical or non-rejection).

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