10 SSGB Amity BSI Hypothesis

Module-10
Hypothesis Testing
Copyright 2012 BSI. All rights

reserved.
Objectives of this module
To introduce a range of hypothesis tests suitable for testing for differences between
averages.
Specifically:
1 Sample t-test
2 Sample t-test
Paired t-test
ANOVA
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Tools for Verifying the Causes
Hypothesis Tests
ANOVA
Design of
Experiments

reserved.
Verify the Causes

Identify possible
relationships
Correlation
Determine strength
of relationships
Regression
Quantify
relationships
Increasing complexity
of relationship
Plot - Scatter
Matrix
Boxplot
Dotplot
Identify and quantify

complex relationships
Hypothesis Tests for Average
Before a hypothesis test for averages can be selected, there are two preliminary
questions:
1) Are the samples Normally distributed?
Each of the samples that are to be included in the test must contain Normally
distributed data in order for the results of the test to be statistically valid.
2) How many samples do you want to compare?

The number of samples refers to the number of different samples (subgroups) that
are to be compared, not the amount of data that is in each of those samples (thats sample
size).
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To compare the Averages of samples of data

1
Determine
the Number
of Samples
YES
Are the
Samples
normally
distributed
2
2
3+
NO
Transform the
Data
using Box-Cox
NO
Compare
Median
Values
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1 Sample t - Test
2 Sample t - Test
Paired t - Test
One-way Anova
To compare the Medians of samples of data

Determine
the Number
of Samples
YES
Are the
Samples
normally
distributed NO
Transform the
Data
using Box-Cox
NO
Compare
Median
Values
YES
Does the
Data have
Outliers
NO
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Use the
Moods
Median
Test
Use the
KruskalWallis
Test
6
An Expensive Situation
You manage a warranty claims department. A customer claims loss of earnings of

$1,245 for an item which usually is about $1,000.
You examine 250 previous claims of the same item to make a comparison and find the
average to indeed be $997 with a standard deviation $88.
You want to know if the customer is over-claiming or if it is reasonable
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Innocent or Guilty?
If the customer is not over-claiming (it is a legitimate claim) then we would expect the
claim to fit with the pattern of data represented by the previous 250 claims
If the customer is over-claiming then we would expect the claim to not fit the pattern of
data from the previous 250 claims
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Does the Claim fit the Pattern?

You remember from previous module that if the data is normally distributed you can apply
normal theory
s = 88
1245
997 1085 1173 1261
1245 - 997
Z=
= 2.82
88
By using standard Normal

tables we can calculate the
probability of a claim of
$1245 based on the historical
data. If the probability is low,
then we can assume an
Illegitimate claim
X-X
Z= s
From Standard Normal tables the P-value, the probability of being equal to or greater than
1245 is 0.0024 or 0.24%. In other words we would expect such a claim to happen 1 in 417
claims
C
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P-values are Probabilities of Interest
P-value
Tail area
Area under curve beyond value of interest
Probability of being at value of interest or beyond
-4
-3
-2
-1
Value of
Interest
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-4
-3
-2
-1
Value of
Interest
-4
-3
-2
-1
Value of
Interest
Value of
Interest
10
Making the Decision
The Normal theory is telling us that based on the previous 250 claims, we
should expect a claim of $1245 or greater every 417 claims
Hence:
This claim is legitimate it is that 1 in 417
This is not legitimate - it does not fit the previous data
Experience shows a small p-value (0 to 0.05) means

The probability is small that the value of interest comes from that distribution by chance therefore
something else is going on
Since our p-value 0.024 < 0.05 we can conclude that the claim is not legitimate
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What Have we done?
In the previous example we have used the properties of the Normal distribution
to test whether the occurrence of an event could have happened by chance
(the data fits the expected pattern) or there is a real difference (the data does
not fit the expected pattern)
This type of situation occurs frequently during Six Sigma improvement projects,
either in the
Analyze phase when we are looking for differences to identify potential roots causes
Improve and Control phases when we are aiming to demonstrate that a real change has been made
we have made a difference
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Analyze: Is there a Difference?
A common question during the Analyze phase is is there really a difference?

For example: We suspect the output of a process depends upon the supplier
Supplier A
Process
YA
Variation in
process output
Sample yA and sA
Is there a difference?
Sample yB and sB
Supplier B
Process
C
reserved.
YB
Variation in
process output
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Improve: Have We Made a Difference?
A common question having improved a process is have we really made a

difference?
Variation in
process output
Yold
CHANGE
Old Process
Sample yold and sold
Sample ynew and snew
Variation in
process output
New Process
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Ynew
14
Looking at the histograms may give us the idea that there is a difference
20
Frequency
Frequency
20
10
10
0
10 11 12 13 14 15 16 17 18 19 20
Yold
10 11
12 13 14
15 16 17
18 19
Ynew
But can we be sure?

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A Difference?
It is possible that we have taken two samples from the same distribution
Old
sample
New
sample
While on face value they look different statistically they are not!! The difference
is due to chance (sampling)
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16
Hypothesis Testing
In the first example we calculated probabilities to help us decide. This situation is

common, where we are interested in making a decision about differences between two or
more sets of data that relate to real world situations
Hypothesis Testing allows us to decide whether an observed difference is real or has
happened by chance
In simple terms we expect there to be a difference between expected and observed
outcomes due to random (chance/common cause variation) factors. Hypothesis testing is
concerned with whether these differences are so large that they cannot be explained by
random (chance) effects
Hypothesis tests are often based on sample data in which case we use sampling
distributions rather than the distribution of individual values
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Hypothesis Testing Concept
In order to show that an apparent difference is real or due to chance we start

by assuming that there is no difference (Null Hypothesis, H0).
If the observed difference is within that expected by chance then the Null Hypothesis of no
difference is correct.
If the observed difference is greater than that expected by chance then the Null Hypothesis of no
difference is not correct.
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Greater Than Expected!
Distribution of
sample means -
100%
99.73%
95.45%
68.26%
-3x -2x-1x
1x 2x 3x
Mean x
+
Theoretically the limits
are
We cannot be 100% certain that an actual sample mean falls outside the distribution.
There is always an element of risk
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95% Confidence
Experience has shown that setting the decision Boundaries at 95% provides
a good balance between being able to
make a decision and the risk of making the wrong decision
Distribution of
sample means
95%
-1.96x 1.96x
Mean x
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20
Risk
A point here could be due

to chance or there is a difference
If we decide they are different
when they are not we have made a
type I error
A point here could be due to

chance or there is a difference.
If decide they are the same when
they are not we have made a
type II error
The risk of making this error

Is called the -risk
The risk of making this error

is called the -risk
95%
Mean x
C
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Type I and II errors
Type I - Deciding they are different when they are not

Type II - Not detecting a difference when there is one
P-value = the actual probability of making a Type I error

The probability of a Type II can be calculated given an assumed true difference
Both are important
Guarding too heavily against one increase the risk of the other
Increasing the sample size
Reduces Type II errors
Allows you to detect smaller differences
More Later
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22
Hypothesis Tests
Hypothesis tests can be used in a number of situations:

A sample is taken and found to have a mean x, is this value equal to a target value T?
Samples taken before and after a change, the two sample means are different - but are they?
Samples from a process for different stratification factors, the two sample means are different - but
are they?
Samples taken before and after a change, the standard deviations are different - but are they?
Samples from a process for different stratification factors, the two sample standard deviations are
different - but are they?
The proportion defective appears to vary with different factors but does it?
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Steps in Hypothesis Testing
Hypothesis tests follow the pattern

determine the null hypothesis H0
determine the alternative hypothesis H1 or Ha
determine statistical test
state level of risk
establish sample size
collect data
analyse data
accept or reject the null hypothesis
determine conclusion
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1. The Null Hypothesis
The null hypothesis is always stated so as to specify that there is no (null) difference
When comparing means or variances the null hypothesis is:

H0: = Target
H0: 1 = 2
H0: 1 = 2
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25
2. The Alternative Hypothesis
The alternative hypothesis opposes the null hypothesis and can therefore has several
options
For example
H1: 1 < 2
or
H1: 1 > 2
or
H1: 1 2
C
reserved.
The choice depends

upon the problem
Minitab gives the
option to select
these
26
3. Determine Tests
Hypothesis Test
Can be used to
t-test
Compare a group average against a target.

Compare two group averages.
paired t-test
Compare two group averages when data is

matched.
ANOVA
(Analysis Of Variance)
Compare two or more group averages.
Test for equal variances (F-test,

Bartletts test, Levenes test)
Compare two or more group variances.
Chi-square test
Compare two or more group proportions.
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3. Determine Test
Hypothesis tests are used when the input or process (X) variable is discrete.
If the X data are continuous, use Regression analysis to judge whether they are
related to the output (Y) variable.
X
Discrete
Discrete
reserved.
(Proportions)
Continuous
(Groups)
Continuous
t-test
Paired t-test
Regression
ANOVA
Chi-Square
Logistic
regression
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4. State level of Risk
It is very important to specify before conducting the test the level of risk that the decision
will be based on
The risk means that there is the chance that we will make the wrong decision
In assessing the risk level we need to consider the situation and the business it is a
question of significance vs. importance
Significant means there is a real difference as proven by a hypothesis test
Important means that the difference observed is important to the business
Typically the -risk is set at 5% which provides a 95% confidence
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"Important" vs. "Significant" Differences
Significant but not important differences

Sometimes you will detect a statistically significant differenceyet it will be too small to be of
practical importance to your business.
Example: A project to reduce machine setup times
The average time for the old setup is 45 minutes. The new average setup time is 30 minutes.
The observed difference of 15 minutes is statistically significant
However, to justify the cost of implementation, a reduction of 25 minutes is necessary
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"Important" vs. "Significant" Differences,
Important but not significant differences

Sometimes you cannot claim a difference is statistically significant yet the observed
difference is of importance to the business
Example: Production volumes
An increase of 1000 items produced per day is observed during the pilot.
An increase of 1000 is important to the business.
However, the difference is not statistically significant
Either the observed difference is due to random variation and no true difference exists,
or the the variation is too large (or sample size too small) to detect the difference.
You (and your business leaders) need to decide if it is worth the risk to go ahead and
implement the new process
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5. Establish Sample Size
The ability to detect differences is related to the sample size

A small sample means we cannot detect small differences, but the cost of data
collection is low
A large sample size will enable the detection of small differences, but the cost of data
collection could be high
Selecting the right sample size depends upon the Power = (1 - )
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6. Collect Data
Remember all the rules and guidelines about collecting data

Sample size
Good operational definition
Clear measurement procedure
Un-biased samples
Good Gauge R&R
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7. Analyse Data
All hypothesis tests can be conducted by hand calculation BUT

Minitab Rules!
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8. Acceptance or Rejection
Method 1
if the p-value is > or = to - fail to reject H0
if the p-value is < - reject H0 and accept H1

Method 2
if 0 falls within the confidence interval - fail to reject H0

if 0 falls outside the confidence interval - reject H0 and accept H1
In practice we use Methods 2 and 3 from information provided by Minitab
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35
t -tests

reserved.

1
Determine
the Number
of Samples
YES
Are the
Samples
normally
distributed
2
2
3+
NO
Transform the
Data
using Box-Cox
NO
Compare
Median
Values
C
opyright
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SI.A
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1 Sample t - Test
2 Sample t - Test
Paired t - Test
One-way Anova
37
1 Sample t-test (1)
1 Sample t-tests are used to compare the average of one sample of data against a known average.
The known average may be a historical average or an industry benchmark.
For the purpose of the test, the known average is assumed to be exact.
Open data file: One-Sample-t.MPJ
reserved.
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1 Sample t-test (2)
A project team has implemented a new invoicing process, and wants to compare it
against the historical average of 16.5 days.
Individual Value Plot of New Process

22
Hypothesis:
New Process
20
The Individual Value Plot suggests
18
that the average invoice time for
16
14
12
16.5
the new process is lower (quicker)
New process
than the historical average of 16.5
10

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1 Sample t-test (3)
A 1 Sample t-test can be used to test if the difference between the averages is
statistically significant.
The hypotheses for the test would be:

Ho: There is no difference between the average invoice time of the new process and
16.5
Ha: New process is lower than average invoice time of 16.5
Because our theory is that there is a difference, we expect to reject the Null hypothesis.
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40
1 Sample t-test (4)
MINITAB: Stat > Basic Statistics > 1-Sample t

There are two options for entering
data.
1st Option: Enter the column that
contains the data here.
2nd Option: If you know the sample

size, mean and standard deviation
of the data it can be entered here.
In both cases, the known average that the data is

to be compared against should be entered here.
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1 Sample t-tests (5)
Leave the confidence level of 95%

Alternative: less than
Select the graph most appropriate for the

samples sizes involved. If in doubt, check
all three.

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One-Sample T: New Process
Session Window
Output for 1 Sample
t-test
Test of mu = 16.5 vs < 16.5

95%
Upper
Variable N Mean StDev SE Mean Bound T P
New Process 15 14.9818 3.1218 0.8060 16.4015 -1.88 0.040
The p-value for the 1 sample

t-test is found in the session
window output. In this case,
the p-value is 0.040
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Since the p-value for this test is less than 0.05, we can be
95% confident that there is a difference between the
average invoicing time of the new process versus the
historical average. We reject the Null Hypothesis
43

Histogramof NewProcess
Individual ValuePlot of NewProcess
(with Ho and 95%t-confidence interval for the mean)
(withHoand95%t-confidence interval for the mean)
Frequency
4
3
2
1
_
X
Ho
_
X
Ho
10
12
14
16
18
NewProcess
20
22
MINITAB adds a blue line to the graphs that

represents the confidence interval of the
sample average, and also indicates the
position of Ho (the known average).

reserved.
10
12
14
16
NewProcess
18
20
22
In this case, Ho (the known average) is

outside the confidence interval of the
sample average and therefore we can
prove a difference between the two.
44
1 Sample t-test Whiskey or water?
Problem : A cocktail bar suspects that one of its suppliers of whiskey is adding water to
increase profits. The freezing temperature of whiskey has a normal distribution with a
mean of = - 0.5450 C. Adding water raises the freezing temperature. The cocktail bar
wants to know if its suspicions are correct. Is the supplier adding water to its whiskey?
Procedure: A sample from each of ten bottles is obtained from this supplier.
Experimental Unit : A bottle.
Measurement : Freezing temperature of the sample.
Significance Level : = 0.05
Data Set : Whiskey.MPJ
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45
1
Determine
the Number
of Samples
YES
Are the
Samples
normally
distributed
2
2
3+
NO
Transform the
Data
using Box-Cox
NO
Compare
Median
Values
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1 Sample t - Test
2 Sample t - Test
Paired t - Test
One-way Anova
46
The concept of Two Sample t-tests

You take two samples of data from
the same process, but at different
times. Has the process mean moved?
Would you think the process mean

has moved if the results had been..
What did you look at to make your decisions?
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2 Sample t-tests are used to compare the averages of two samples of data. The two
samples may represent:
two different suppliers
two different processes
two different teams
two different products etc.
The two samples can be of different sample sizes, since the 2 sample t-test takes account
of both sample sizes.
The two samples can have different levels of variation (standard deviation) since the two
sample t-test takes account of this as well.
Open data file: Two-Sample-T-Appeal.MPJ
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A project team has implemented a new appeals process, and the box plot below shows
the cycle time of the new and old processes.
Boxplot of Time (days) vs Process

42.5
Hypothesis:
40.0
Time (days)
37.5
The Box Plot suggests that the

average cycle time for the new
appeals process is lower (quicker)
than the old process.
35.0
32.5
30.0
27.5
25.0
New
Old
Process
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49

A 2 Sample t-test can be used to test if the difference between the average cycle
times is statistically significant.
The hypotheses for the test would be:
Ho: There is no difference between the average cycle times for the new and old processes.
Ha: The new cycle time is lower than the cycle times for the old processes.
Because our theory is that the new is lower, we expect to reject the Null
hypothesis.
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50

There are several options for entering
data.
1st Option: If the data is in a single
column,
with
second
column
containing subgroup data.

2nd Option: If the two data samples
are in two separate columns.
3rd Option: If you know the sample
size, mean and standard deviation of
both samples, this information can be
entered here.
C
o
p
y
rig
h
t
2
0
1
2
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ts
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Set the options as shown above:

a confidence of 95%
a test difference of 0.0
Alternative: less than

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Two-Sample T-Test and CI: Time (days), Process
Two-sample T for Time (days)
Process N Mean StDev SE Mean
New
20 32.12 3.46 0.77
Old
25 34.35 3.12 0.62
Session Window
Output for 2 Sample
t-test
Difference = mu (New) - mu (Old)

Estimate for difference: -2.23700
95% upper bound for difference: -0.56083
T-Test of difference = 0 (vs <): T-Value = -2.25 P-Value = 0.015 DF = 38
The p-value for the 2 sample t-test is

found in the session window output. In
this case, the p-value is 0.015.
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Since the p-value for this test is less than

0.05, we can be over 95% confident that
there is a difference between the average
cycle times.
53

Individual Value Plot of Time (days) vs Process
42.5
42.5
40.0
40.0
37.5
37.5
Time (days)
Time (days)
Boxplot of Time (days) by Process
35.0
32.5
35.0
32.5
30.0
30.0
27.5
27.5
25.0
25.0
New
Old
Process
New
Old
Process
The graphs provided by the 2 sample t-test are the same as those provided by using
the graph menu.
By default, MINITAB adds a symbol to show the average of each subgroup.

reserved.
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Exercise: Using the data file: Two-Sample-T-Appeal.MPJ
Repeat the test using the samples in different columns option.
Repeat the test using the summarised data option.
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55

1
Determine
the Number
of Samples
YES
Are the
Samples
normally
distributed
2
2
3+
NO
Transform the
Data
using Box-Cox
NO
Compare
Median
Values
C
opyright
2012B
SI.A
lrights
reserved.
1 Sample t - Test
2 Sample t - Test
Paired t - Test
One-way Anova
56

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Module-10

Copyright 2012 BSI. All rights

Objectives of this module

Tools for Verifying the Causes

Copyright 2012 BSI. All rights

Verify the Causes

Identify and quantify

Hypothesis Tests for Average

2) How many samples do you want to compare?

To compare the Averages of samples of data

To compare the Medians of samples of data

You manage a warranty claims department. A customer claims loss of earnings of

Does the Claim fit the Pattern?

997 1085 1173 1261

By using standard Normal

P-values are Probabilities of Interest

Making the Decision

Experience shows a small p-value (0 to 0.05) means

What Have we done?

Analyze: Is there a Difference?

A common question during the Analyze phase is is there really a difference?

Improve: Have We Made a Difference?

A common question having improved a process is have we really made a

Sample yold and sold

But can we be sure?

In the first example we calculated probabilities to help us decide. This situation is

Hypothesis Testing Concept

In order to show that an apparent difference is real or due to chance we start

Greater Than Expected!

A point here could be due

A point here could be due to

The risk of making this error

The risk of making this error

Type I and II errors

Type I - Deciding they are different when they are not

P-value = the actual probability of making a Type I error

Hypothesis tests can be used in a number of situations:

Steps in Hypothesis Testing

Hypothesis tests follow the pattern

1. The Null Hypothesis

When comparing means or variances the null hypothesis is:

2. The Alternative Hypothesis

The choice depends

Compare a group average against a target.

Compare two group averages when data is

Compare two or more group averages.

Test for equal variances (F-test,

Compare two or more group variances.

Compare two or more group proportions.

4. State level of Risk

"Important" vs. "Significant" Differences

Significant but not important differences

"Important" vs. "Significant" Differences,

Important but not significant differences

5. Establish Sample Size

The ability to detect differences is related to the sample size

Remember all the rules and guidelines about collecting data

All hypothesis tests can be conducted by hand calculation BUT

if the p-value is > or = to - fail to reject H0

if the p-value is < - reject H0 and accept H1

if 0 falls within the confidence interval - fail to reject H0

In practice we use Methods 2 and 3 from information provided by Minitab

Copyright 2012 BSI. All rights

To compare the Averages of samples of data