Hypothesis Testing for Single Populations

Chapter Nine

Introduction to Hypothesis Testing

 Rejection and nonrejection regions  Type I and Type II errors

About Population Mean (known ) About Population Mean (unknown ) About Proportion
Practice Problems: 9.3, 9.5, 9.6, 9.7, 9.11, 9.17, 9.23, 9.25

Introduction to Hypothesis Testing



Hypothesis Testing use statistical evidence to test various theories about phenomena Statistical Hypotheses

a more formal structure derived from the research

hypothesis.

Composed of two parts

Null hypothesis (Ho) null hypothesis exists; nothing new is happening; the null condition exists Alternative (Ha) the new theory is true; something new is happening

Null and Alternative Hypotheses



The Null and Alternative Hypotheses are mutually exclusive

Only one of them can be true



The Null and Alternative Hypotheses are collectively exhaustive

 

The Null Hypothesis is assumed to be true The burden of proof falls on the Alternative Hypothesis

Null and Alternative Hypotheses: Example

 

A manufacturer is filling 40 oz. packages with flour The company wants the package contents to average 40 ounces

H 0 : Q ! 40 oz H a : Q { 40 oz

One-tailed and Two-tailed Tests



One-tailed Tests

H 0 : Q ! 40 Ha : Q


H 0 : p ! 0.18 H a : p " 0.18 H 0 : Q ! 12 H a : Q { 12

40

Two-tailed Test

8 Steps in Testing Hypotheses

1.

Establish hypotheses: state the null and alternative hypotheses Determine the appropriate test and sampling distribution (one-tailed or two-tailed and parameter ( or or p) Specify the Type I error rate State the decision rule Gather sample data Calculate the value of the test statistic State the statistical conclusion Make a managerial decision

2.

3. 4. 5. 6. 7. 8.

Rejection and Non Rejection Regions



Conceptually and graphically, statistical outcomes that result in the rejection of the null hypothesis lie in what is termed the rejection region Statistical outcomes that fail to result in the rejection of the null hypothesis lie in what is termed the non rejection region

Rejection and Non Rejection Regions

Possible statistical outcomes
1. 2.

Reject null hypothesis results lie in this area Do not reject hypothesis stat results fail to reject the null hypothesis

3.

***If values fall in rejection region you reject the null hypothesis

4.

Draw the Rejection and Non-Rejection Graph

Rejection and Non Rejection Regions

Rejection Region

Rejection Region

Non Rejection Region = 40 oz Critical Value Critical Value

One-tailed Tests

H 0 : Q ! 40 Ha : Q
Rejection Region

H0 : Q ! 40 Ha : Q " 40
Rejection Region

40

Non Rejection Region

Q = 40 oz

Non Rejection Region Q = 40 oz

Critical Value

Critical Value

Two-tailed Tests

Ho : Q ! 40 Ha : Q { 40

Rejection Region

Rejection Region

Non Rejection Region = 12 oz

Critical Values

Type I and Type II Errors



Type I Error

Committed by rejecting a true null hypothesis If the null hypothesis is true, any mean that falls
in a rejection region will be a type I error

The probability of committing a Type I error is

called , the level of significance


Type II Error

Committed when a researcher fails to reject a

false null hypothesis

The probability of committing a Type II error is

called

Decision Table for Hypothesis Testing

Null True Fail to reject null

Null False Type II error F Correct Decision

Correct Decision Type I error E

Reject null

Testing a Hypotheses About a Population Mean Using the z Statistic ( Known)

The hypothesized mean that we are testing is a benchmark The value of does not come from a sample The test statistic compares the sample mean x with the hypothesized mean The difference between x and is divided by the standard error of the mean (denoted x) The test statistic is

x z= / n

Testing a Hypotheses About a Population Mean Using the z Statistic ( Known)

Testing the Hypothesis
Task 1: State the hypotheses For example, H0: < 216 mm Ha: > 216 mm Task 2: Test For example, for = .05 for the right-tail area, Reject H0 if z > 1.645, otherwise do not reject H0

Testing a Hypotheses About a Population Mean Using the z Statistic ( Known)

Testing the Hypothesis Task 3: Take Statistical Action xQ z= W/ n Task 4: Determine the Business Implication If the test statistic falls in the rejection region as defined by the critical value, we reject H0 and conclude Ha

Testing a Hypotheses About a Population Mean Using the z Statistic ( Known)



Example: A survey, done 10 years ago, of CPAs in the U.S. found that their average salary was $74,914. An accounting researcher would like to test whether this average has changed over the years. A sample of 112 CPAs produced a mean salary of $78,695. Assume that the population standard deviation of salaries, W = $14,530.

Testing a Hypotheses About a Population Mean Using the z Statistic ( Known)



Step 1: Hypothesize

H 0 : Q ! $74,914 H a : Q { $74,914

Step 2: Test

X Q z! W/ n

 

Step 3: Specify the Type I error rate - E = 0.05 zE/2 = s1.96 Step 4: Establish the decision rule Reject H0 if the test statistic < -1.96 or if test statistic > + 1.96

Testing a Hypotheses About a Population Mean Using the z Statistic ( Known)



Step 5: Gather sample datax-bar = $78,695, hypothesized Q = $74,914 Also, n = 112, W = $14,530

Step 6: Compute the test statistic.

z!

78,695  74,914 14,530 / 112

! 2.75

Testing a Hypotheses About a Population Mean Using the z Statistic ( Known)



Step 7: Reach a statistical conclusion Since z = 2.75 > 1.96, reject H0.

Step 8: Business decision Statistically, the researcher has enough evidence to reject the figure of $74,914 as the true average salary for CPAs. In addition, based on the evidence gathered, it may suggest that the average has increased over the 10-year period.

Testing a Hypotheses About a Population Mean Using the z Statistic ( Known)

Testing the Hypothesis
For a two-tailed test, we split the risk of Type I error by putting /2 in each tail. For example, for = .05

Testing a Hypotheses About a Population Mean Using the z Statistic ( Known)

Analogy to Confidence Intervals
A two-tailed hypothesis test at the 5% level of significance ( = .05) is exactly equivalent to asking whether the 95% confidence interval for the mean includes the hypothesized mean If the confidence interval includes the hypothesized mean, then we cannot reject the null hypothesis

Using p value to Test Hypotheses



p value another way to reach statistical conclusion in hypothesis testing

No preset value of is given in the p value method p value defines the smallest value of for which the
null hypothesis can be ejected
  

p-value < E reject H0 p-value u E do not reject H0 For two tailed test, is split to determine the critical value of the test statistic

The p value is then compared z or

/2 for two tailed tests to determine statistical significance

Using p value to Test Hypotheses

Critical Value Method to Test Hypotheses



The critical value method determines the critical mean value required for z to be in the rejection region and uses it to test the hypotheses.

xc  Q zc ! W n

Critical Value Method to Test Hypotheses

For the previous example,

xc  74,914 s1.96 ! 14,530 112 or 14,530 ! 74,914 s 2,691 xc ! 74,914 s1.96 112

lower xc ! 72,223 and upper xc ! 77,605

Testing a Hypotheses About a Population Mean Using the t Statistic ( unknown)

Using Students t When the population standard deviation s is unknown and the population may be assumed normal, the test statistic follows the Students t distribution with n = n 1 degrees of freedom. The test statistic is xQ t= s/ n

Testing a Hypotheses About a Population Mean Using the t Statistic ( unknown)

Testing a Hypothesis
Task 1: State the hypotheses For example, H0: = 142 H1: 142 Task 2: Test For example, for = .10 for a two-tailed area, Reject H0 if t > 1.714 or t < -1.714, otherwise do not reject H0

Testing a Hypotheses About a Population Mean Using the t Statistic ( unknown)

Testing a Hypothesis Task 3: Calculate the test statistic xQ tcalc = s/ n Task 4: Make the decision
If the test statistic falls in the rejection region as defined by the critical values, we reject H0 and conclude Ha

Testing a Hypotheses About a Population Mean Using the t Statistic ( unknown)

Confidence Intervals versus Hypothesis Test A two-tailed hypothesis test at the 10% level of significance (E = .10) is equivalent to a twosided 90% confidence interval for the mean If the confidence interval does not include the hypothesized mean, then we reject the null hypothesis

Testing Hypotheses About a Proportion

The value of p that we are testing is a benchmark such as past experience, an industry standard, or a product specification The value of p does not come from a sample

Critical Value
The test statistic is compared with a critical value from a table The critical value shows the range of values for the test statistic that would be expected by chance if the H0 were true

Testing Hypotheses About a Proportion

Steps in Testing a Proportion
Task 1: State the hypotheses For example, H0: p > .13 H1: p < .13 Task 2: Specify the decision rule For example, for = .05 for a left-tail area, reject H0 if z < -1.645, otherwise do not reject H0
Figure 9.12

Testing Hypotheses About a Proportion

Steps in Testing a Proportion
For a two-tailed test, we split the risk of type I error by putting /2 in each tail. For example, for = .05

Figure 9.14

Testing Hypotheses About a Proportion

Steps in Testing a Proportion
Now, check the normality assumption: np > 5 and n(1- p) > 5 Task 3: Calculate the test statistic 3:

p(1-p) (1p hat p where Wp = z= n Wp

Task 4: Make the decision If test statistic falls in the rejection region as defined by the critical value, we reject H0 and conclude Ha

Testing Hypotheses About a Proportion

Using the p-Value
The p-value is the probability of the sample result (or one more extreme) assuming that H0 is true The p-value can be obtained using Excels cumulative standard normal function = NORMSDIST(z) The p-value can also be obtained from Appendix A-5 Using the p-value, we reject H0 if p-value <

Testing Hypotheses About a Proportion

Calculating a p-Value for a Two-Tailed Test For a two-tailed test, we divide the risk into equal tails. So, to compare the p-value to a, first combine the p-values in the two tail areas For example, if our test statistic was -1.975, then 2 x P(z < - 1.975) = 2 x .02413 = .04826 At E = .05, we would reject H0 since p-value = .04826 < E.