NSUCh10Fin

A hypothesis is a claim (assumption) about a population parameter Example: The mean monthly cell phone bill of this city is = $42 Example: The proportion of adults in this city with cell phones is p = .68. Null Hypothesis H 0 : A maintained hypothesis that is held to be true unless sufficient evidence to the contrary is obtained. Null hypothesis: Always contains = , or sign, it may or may not be rejected Alternative Hypothesis H a : A hypothesis against which the null hypothesis is tested and which will be held to be true if the null is held false. Alternative hypothesis: is the opposite of the null hypothesis, e.g., The average number of TV sets in BD homes is not equal to 1 ( H1: 1 ), it never contains the = , or sign, is generally the hypothesis that the researcher is trying to support p-value: Probability of obtaining a test statistic more extreme ( or ) than the observed sample value given H0 is true Simple Hypothesis: A hypothesis that specifies a single value for a population parameter of interest. Composite Hypothesis: A hypothesis that specifies a range of values for a population parameter. One-Sided Alternative: An alternative hypothesis involving all possible values of a population parameter on either one side or the other of (that is, either greater than or less than) the value specified by a simple null hypothesis. Two-Sided Alternative: An alternative hypothesis involving all possible values of a population parameter other than the value specified by a simple null hypothesis. Hypothesis Test Decisions: A decision rule is formulated, leading the investigator to either reject or fail to reject the null hypothesis on the basis of sample evidence. Type I Error: The rejection of a true null hypothesis. Type II Error: The failure to reject a false null hypothesis.

NSUCh10Fin

Significance Level: The probability of rejecting a null hypothesis that is true. This probability is sometimes expressed as a percentage, so a test of significance level a is referred to as a 100a%-level test. Power: The probability of rejecting a null hypothesis that is false. Critical value: The boundary point(s) between the acceptance region and critical region.

NSUCh10Fin

Steps of Hypothesis Testing 1. Evaluation of data. 2. Review of assumptions. 3. Determine the null and alternative hypotheses that are appropriate for the application. 4. Select the test statistic that will be used to decide whether or not to reject the null hypothesis. 5. Specify the level of significance for the test. 6. Use the level of significance to develop the rejection rule that indicates the values of the test statistic that will lead to the rejection of H 0 . 7. Collect the sample data and compute the value of the test statistic. 8. a. Compare the value of the test statistic to the critical value(s) specified in the rejection rule to determine whether or not H 0 should be rejected or b. Compute the p-value based on the test statistic in step 5. Use the p-value to determine whether or not H 0 should be rejected.

NSUCh10Fin

General description: Testing single mean Null hypothesis: H0 : = 0 Case1. Test statistic z = Alternative Hypothesis
Ha : > 0 Ha : < 0 Ha : 0

x 0 ~ N (0,1). (when is known). n z z z z either z z /2 or z z /2 x

Rejection region for level test

0 Case2. When unknown and n 30, z = s n ~ N (0,1).

Testing two population means Null hypothesis: H0 : 1 = 2 Case1. Test statistic

Ha : 1 > 2 Ha : 1 < 2 Ha : 1 2 z= x1 x2
2 s12 s2 + n1 n2

~ N (0,1).

(Both samples need to be at least 30). Rejection region for level test

Alternative Hypothesis

z z z z either z z /2 or z z /2

Testing about proportion: Null hypothesis: H0 : = 0 Test statistic

z=

p ~ N (0,1). (1 ) (when is known). n

Testing two proportion: Null hypothesis: H0 : 1 = 2 Case1. Test statistic

z= p1 p2 ~ N (0,1). pc (1 pc ) pc (1 pc ) + n1 n2

pc =

X1 X 2 n1 + n2

Small sample cases

NSUCh10Fin

1. Single mean: Two means: Paired t test:

d sd / n

t=

NSUCh10Fin

10.11 A manufacturer of detergent claims that the con

tents of boxes sold weigh on average at least 16 ounces. The distribution of weight is known to be normal, with standard deviation 0.4 ounce. A random sample of 16 boxes yielded a sample mean weight of 15.84 ounces. Test at the 10% signifi cance level the null hypothesis that the popula tion mean weight is at least 16 ounces.

NSUCh10Fin

10.23 A company selling licenses for new e-commerce computer software advertises that firms using this software obtain, on average during the first year, a yield of 10% on their initial investments. A ran dom sample of 10 of these franchises produced the following yields for the first year of operation: 6.1 9.2 11.5 8.6 12.1 3.9 8.4 10.1 9.4 8.9 Assuming that population yields are normally company's claim. distributed, test the

NSUCh10Fin

10.24 A process that produces bottles of shampoo, when operating correctly, produces bottles whose con tents weigh, on average, 20 ounces. A random sam ple of nine bottles from a single production run yielded the following content weights (in ounces): 21.4 19.7 19.7 20.6 20.8 20.1 19.7 20.3 20.9 Assuming that the population distribution is normal, test at the 5% level against a two-sided alternative the null hypothesis that the process is operating correctly.
10.31 In a random sample of 998 adults in the United States, 17.3% of the sample

members indicated some measure of disagreement with this statement: "Globalization is more than an economic trade systeminstead it includes institutions and culture." Test at the 5% level the hypothesis that at least 25% of all U.S. adults would disagree with this statement.

NSUCh10Fin

In a random sample of 160 business school students, 72 sample members indicated some measure of agreement with this statement: "Scores on a standardized entrance exam are less important for a student's chance to succeed academically than is the student's high school GPA." Test the null hypothesis that one-half of all business school graduates would agree with this statement against a two-sided alternative. Find and interpret the p-value of the test.

NSUCh10Fin

10

Of a random sample of 199 auditors, 104 indicated some measure of agreement with this statement: "Cash flow is an important indication of prof itability." Test at the 10% significance level against a two-sided alternative the null hypothesis that one-half of the members of this population would agree with this statement. Also find and interpret the p-value of this test.