Chapter Fifteen

Statistical Testing
of Differences and
Relationships
 Chapter Fifteen
Statistical Testing of Differences

Become aware of the nature of statistical significance;

Understand the concept of hypothesis development and

how to test hypotheses;

Understand the difference between type I and type II errors;

Learning Objectives Be familiar with several of the more common statistical

tests of goodness of fit, hypotheses about one mean,
hypotheses about two means, and hypotheses about
proportions;

Learn about analysis of variance.

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 Statistical Significance

Mathematical Differences:

By definition, if numbers are not exactly the same,

they are different. This does not, however, mean
that the difference is either important or statistically
significant.

Statistical Significance:

If a particular difference is large enough to be unlikely

to have occurred because of chance or sampling error,
then the difference is statistically significant.
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 Statistical Significance
Managerial Important Differences:

One must be able to distinguish between

mathematically differences and statistically significant
differences in using the data analysis in managerial
decision making.

Hypothesis:

An assumption, argument, or theory that a researcher or

manager makes about some characteristics of the
population under study.

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 Hypothesis Testing

Step One: Stating the hypothesis

Null Hypothesis the status quo is proven to be true.
Alternative Hypotheses - another alternative is proven to the true.

Step Two: Choosing the appropriate test statistic

Test of means, test or proportions, ANOVA, etc.

Step Three: Developing a decision rule

Determine the significance level.
Needed to determine whether to reject or fail to reject the null hypothesis.

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 Hypothesis Testing

Step Four: Calculating the value of the test statistic

Use the appropriate formula to calculate the value of the statistic.

Step Five: Stating the conclusion

Stated from the perspective of the original research question.

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Hypothesis Testing Error Types

Type I:
Rejection of the null hypothesis when, in fact, it is true.

Type II:
Acceptance of the null hypothesis when, in fact, it is false.

Tests are either one or two-tailed. This approach depends on the nature of
the situation and what the researcher is demonstrating.

One-Tailed:
If you take the medicine, you will get better

Two-Tailed:
If you take the medicine, you will get either better or worse.

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 Error Issues

Actual State of the Fail to Reject Ho Reject Ho

Null Hypothesis

Ho is true Correct (1- ) Type I error ( )

no error

Ho is false Type II error ( ) Correct (1- )

no error

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 Common Statistical Tests

Independent Samples:
Samples in which measurement of a variable in one population
has no effect on measurement of the variable in the other.

Related Samples:
Samples in which measurement of a variable in one population
might influence measurement of the variable in the other.

Degrees of Freedom:
Is equal to the number of observations minus the number of
assumptions or constraints necessary to calculate a statistic.

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 Types of Hypothesis Tests

Z-Test:
Hypothesis test used for a single mean if the sample is large
enough and drawn from a normal population. Usually for
samples of about 30 and above.

t-Test:
Hypothesis test used for a single mean if the sample is too small to
use the Z-test. Usually for samples below 30.

Hypothesis testing that tests the difference between groups of data.

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 Types of Hypothesis Tests

Proportion in One Sample:

Test to determine whether the difference between proportions is greater than
would be expected because of sampling error.

Two Proportions in Independent Samples:

Test to determine the proportional differences between two or more groups.

p-value:
The exact probability of getting a computed test statistic that was largely
due to chance. The smaller the p-value, the smaller the probability that the
observed result occurred by chance.

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