HYPOTHESIS TESTING

HYPOTHESIS TESTING
 an assertion, statement or conjecture concerning
one or more unknown parameters or
distributional properties of the populations
TYPES OF STATISTICAL HYPOTHESIS
Null hypothesis Alternative
 the hypothesis that is hypothesis
being tested and the  the hypothesis
one which the believed to be true
researcher wishes to when the null
reject or not to reject. hypothesis is rejected.
 denoted by H0.  denoted by H1.
 a hypothesis of  may be directional
equality or no (quantifier is < or >)
difference. or non-directional
(quantifier is ).
TEST OF HYPOTHESIS
 a statistical tool or method to determine whether
or not to reject a statistical hypothesis
THE HYPOTHESIS TESTING PROCESS

 Claim: The population mean age is 50.

 H0: μ = 50, H1: μ ≠ 50

Chap 9-5
 Sample the population and find sample mean.

Population

Sample
TYPES OF TESTS OF HYPOTHESIS

One-tailed test of hypothesis

 used to test a null hypothesis against a
directional alternative hypothesis (<, >)

Two-tailed test of hypothesis

 used to test a null hypothesis against a
nondirectional alternative hypothesis ( not equal
to)
 Basic Business Statistics, 11e ©
THE TEST STATISTIC AND

2009 Prentice-Hall, Inc..

CRITICAL VALUES
Sampling Distribution of the test statistic

Chap 9-7
Region of Region of
Rejection Rejection
Region of
Non-Rejection

Critical Values

“Too Far Away” From Mean of Sampling Distribution

POSSIBLE ERRORS IN HYPOTHESIS
TEST DECISION MAKING
 Type I Error
 Reject a true null hypothesis
 Considered a serious type of error

Chap 9-8
 The probability of a Type I Error is 

 Called level of significance of the test

 Set by researcher in advance
 Type II Error
 Failure to reject false null hypothesis
 The probability of a Type II Error is β
 Basic Business Statistics, 11e ©
POSSIBLE ERRORS IN HYPOTHESIS

2009 Prentice-Hall, Inc..

TEST DECISION MAKING (continued)

Possible Hypothesis Test Outcomes

Chap 9-9
Actual Situation

Decision H0 True H0 False

Do Not No Error Type II Error

Reject H0 Probability 1 - α Probability β
Reject H0 Type I Error No Error
Probability α Probability 1 - β
 Basic Business Statistics, 11e ©
LEVEL OF SIGNIFICANCE
AND THE REJECTION REGION

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H0: μ = 3 Level of significance = 
H1: μ ≠ 3

Chap 9-10
 /2  /2

Critical values

Rejection Region

This is a two-tail test because there is a rejection region in both tails

M EASURES IN DECISION MAKING
Test Statistic
 The value generated from sample data
 Test value to be compared with the critical
values

p-value (probability value)

 probability of getting the observed value of the
test statistic at least that extreme (in the
direction of H1), assuming that H0 is true
 the lowest level of significance at which the
observed value of the test statistic is
significant
HYPOTHESIS TESTS FOR THE MEAN

Hypothesis

Chap 9-12
Tests for 

 Known  Unknown
(Z test) (t test)
 Z TEST OF HYPOTHESIS FOR THE MEAN (Σ
KNOWN)
 Convert sample statistic ( ) to a ZSTAT test
X
statistic Hypothesis

Chap 9-13
Tests for 

σKnown
Known σUnknown
Unknown
(Z test) (t test)
The test statistic is:
Xμ
Z STAT 
σ
n
TWO-TAIL TESTS
H0: μ = 3
 There are two
H1: μ  3
cutoff values

Chap 9-14
(critical values),
defining the
regions of /2 /2
rejection
3 X
Reject H0 Do not reject H0 Reject H0

-Zα/2 0 +Zα/2 Z

Lower Upper
critical critical
value value
 STEPS IN HYPOTHESIS TESTING
1. State the null hypothesis, H0 and the alternative
hypothesis, H1
2. Choose the level of significance, , and the sample
size, n

Chap 9-15
3. Determine the appropriate test statistic and
sampling distribution
4. Determine the critical values that divide the
rejection and nonrejection regions
 Z TEST OF HYPOTHESIS FOR THE MEAN (Σ
KNOWN)
 Convert sample statistic ( ) to a ZSTAT test
X
statistic Hypothesis

Chap 9-16
Tests for 

σKnown
Known σUnknown
Unknown
(Z test) (t test)
The test statistic is:
Xμ
Z STAT 
σ
n
TWO-TAIL TESTS
H0: μ = 3
 There are two
H1: μ  3
cutoff values

Chap 9-17
(critical values),
defining the
regions of /2 /2
rejection
3 X
Reject H0 Do not reject H0 Reject H0

-Zα/2 0 +Zα/2 Z

Lower Upper
critical critical
value value
 STEPS IN HYPOTHESIS TESTING
1. State the null hypothesis, H0 and the alternative
hypothesis, H1
2. Choose the level of significance, , and the sample
size, n; Determine the appropriate test statistic and

Chap 9-18
sampling distribution
3. Determine the critical values that divide the
rejection and nonrejection regions
6STEPS IN HYPOTHESIS TESTING
(continued)

4. Collect data and compute the value of the test

statistic

Chap 9-19
5. Make the statistical decision and state the
managerial conclusion. If the test statistic falls into
the non rejection region, do not reject the null
hypothesis H0. If the test statistic falls into the
rejection region, reject the null hypothesis.
 HYPOTHESIS TESTING EXAMPLE

Basic Business Statistics, 11e ©

2009 Prentice-Hall, Inc..
Test the claim that the true mean number of
TV sets in US homes is equal to 3.

Chap 9-20
(Assume σ = 0.8)
1. State the appropriate null and alternative
hypotheses
 H0: μ = 3 H1: μ ≠ 3 (This is a two-tail test)
2. Specify the desired level of significance and the
sample size
 Suppose that  = 0.05 and n = 100 are chosen

for this test

 HYPOTHESIS TESTING EXAMPLE
(continued)

3. Determine the appropriate technique

 σ is assumed known so this is a Z test.

Chap 9-21
4. Determine the critical values
 For  = 0.05 the critical Z values are ±1.96

5. Collect the data and compute the test statistic

 Suppose the sample results are

n = 100, X = 2.84 (σ = 0.8 is assumed known)

So the test statistic is:
X μ 2.84  3  .16
ZSTAT     2.0
σ 0.8 .08
n 100
 HYPOTHESIS TESTING EXAMPLE
(continued)
 6. Is the test statistic in the rejection region?

Chap 9-22
/2 = 0.025 /2 = 0.025

Reject H0 if Reject H0 Do not reject H0 Reject H0

ZSTAT < -1.96 or -Zα/2 = -1.96 0 +Zα/2 = +1.96
ZSTAT > 1.96;
otherwise do
not reject H0 Here, ZSTAT = -2.0 < -1.96, so the
test statistic is in the rejection
region
 HYPOTHESIS TESTING EXAMPLE
(continued)
6 (continued). Reach a decision and interpret the result

Chap 9-23
 = 0.05/2  = 0.05/2

Reject H0 Do not reject H0 Reject H0

-Zα/2 = -1.96 0 +Zα/2= +1.96

-2.0
Since ZSTAT = -2.0 < -1.96, reject the null hypothesis
and conclude there is sufficient evidence that the mean
number of TVs in US homes is not equal to 3
 Basic Business Statistics, 11e ©
2009 Prentice-Hall, Inc..
P-VALUE APPROACH TO TESTING
 p-value: Probability of obtaining a test statistic
equal to or more extreme than the observed sample
value given H0 is true

Chap 9-24
 The p-value is also called the observed level of
significance

 It is the smallest value of  for which H0 can be

rejected
P-VALUE APPROACH TO TESTING:

Basic Business Statistics, 11e ©

INTERPRETING THE P-VALUE

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 Compare the p-value with 

If p-value <  , reject H0

Chap 9-25


 If p-value   , do not reject H0

 Remember

 If the p-value is low then H0 must go

CONSIDER: CHILD’S SPEAKING ABILITY
Suppose a cognitive development researcher has
developed a new technique which intends to increase
the ability of children to learn speaking at an earlier
age than usual (which is found to be at 𝜇 = 13 months).
She tried to test her new technique on a random sample
of 15 children.

 Does the researcher’s new technique indeed

significantly increases the ability of children to learn
speaking at an age earlier than 13 months?

Hypothesis Testing
CONSIDER: CHILD’S SPEAKING ABILITY
Each of the 15 children is subjected to the training technique,
and the times (in months) at which they first spoke are shown
below:

14 6 11 9 11

11 14 12 16 14

8 6 10 15 10
HYPOTHESIS TEST ON ONE-SAMPLE MEAN
 STEP 1: Identify 𝑯𝟎 and 𝑯𝒂

 STEP 2: Specify 𝜶

 STEP 3: Identify the test to use (i.e., t-test)

 STEP 4: Identify the rejection rule

 STEP 5: Compute the test statistic

 STEP 6: Make a decision

 STEP 7: Form a conclusion

STEP 1: IDENTIFY 𝑯𝟎 AND 𝑯𝒂
Statistical Hypothesis
 an assertion or conjecture concerning one or more
populations
 Null Hypothesis (𝑯𝟎 )
 states that in the general population there is no

OPPOSITES
change, no difference, or no relationship between the
variables involved
 Alternative Hypothesis (𝑯𝒂 )
 states that there is a change, a difference, or a

relationship for the general population between the

variables involved

 The null hypothesis and the alternative hypothesis are

mutually exclusive and exhaustive.
STEP 1: IDENTIFY 𝑯𝟎 AND 𝑯𝒂
Alternative Hypothesis (𝑯𝒂 )
 may be directional or non-directional

one-tailed two-tailed
test test

o Let 𝜇0 be the hypothesized value:

 𝑯𝒂 : 𝝁 ≠ 𝝁𝟎  Two-Tailed Test
 𝑯𝒂 : 𝝁 < 𝝁𝟎  Left-Tailed Test (Lower-Tail Test)
one-tailed
 𝑯𝒂 : 𝝁 > 𝝁𝟎  Right-Tailed Test (Upper-Tail Test) test
STEP 1: IDENTIFY 𝑯𝟎 AND 𝑯𝒂

For the Child’s Speaking Ability Problem:

Let 𝜇 = true mean speaking age of the children who have

undergone the new learning technique proposed by the
researcher. Then we wish to evaluate the following
hypotheses:

𝑯𝟎 : 𝝁 ≥ 𝟏𝟑 𝐦𝐨𝐧𝐭𝐡𝐬 Left-Tailed Test

v.s.
𝑯𝒂 : 𝝁 < 𝟏𝟑 𝐦𝐨𝐧𝐭𝐡𝐬
STEP 2: SPECIFY 𝜶
Two Types of Possible Errors: (in decision-making)
 Type I Error

 defined as a decision to reject the null hypothesis when

the null hypothesis is true
 Type II Error

 defined as a decision to retain the null hypothesis when

the null hypothesis is false
STEP 2: SPECIFY 𝜶
For the Child’s Speaking Ability Problem:

Type I Error:
o Conclude that the new technique significantly increase the
ability of children to learn speaking at an earlier age than
usual (i.e., <13 months), when in fact it does not.

Type II Error:
o Conclude that the new technique doe not significantly
increase the ability of children to learn speaking at an
earlier age than usual (i.e., <13 months), when in fact it
does.
STEP 2: SPECIFY 𝜶

Errors are measured

probabilistically!

𝐏 𝐓𝐲𝐩𝐞 𝐈𝐈 𝐞𝐫𝐫𝐨𝐫 = 𝜷

𝐏 𝐓𝐲𝐩𝐞 𝐈 𝐞𝐫𝐫𝐨𝐫 = 𝜶

Inversely Related for a fixed

𝒏
Some Terminologies:
 𝜶 : Significance Level of the Test

 𝟏 − 𝜷 : Power of the Test (for a specified 𝐻𝑎 )

STEP 2: SPECIFY 𝜶
 Why do we usually set 𝜶 rather than 𝜷?

Consider this scenario (Court Trial):

A suspect is being tried at court whether he is guilty of a crime or not.

𝐇𝟎 : 𝐓𝐡𝐞 𝐦𝐚𝐧 𝐢𝐬 𝐢𝐧𝐧𝐨𝐜𝐞𝐧𝐭.

v.s.
𝐇𝐚 : 𝐓𝐡𝐞 𝐦𝐚𝐧 𝐢𝐬 𝐠𝐮𝐢𝐥𝐭𝐲.

It can be verified that committing a Type I error has worse

consequences than committing a Type II error.
⇒ CONTROL 𝜶
STEP 2: SPECIFY 𝜶

For the Child’s Speaking Ability Problem:

Suppose we set the significance level of the test at 5%.

 𝜶 = 𝟎. 𝟎𝟓
STEP 3: IDENTIFY THE TEST TO USE
For tests concerning with one-population mean 𝝁:
 t – test on one sample mean (with df = 𝑛 − 1)

Assumption: The population from which the sample came

from must not be too skewed (i.e., almost symmetric).
STEP 3: IDENTIFY THE TEST TO USE
For the Child’s Speaking Ability Problem:

Since the hypotheses involved concerns a single population

mean (i.e., 𝜇 = the true mean speaking age of the children
who have undergone the new learning technique proposed by
the researcher):
Use t – test on one sample mean (with df = 𝑛 − 1)

 In particular, we have to use a left-tailed t – test with df

= 14.
STEP 4: IDENTIFY THE REJECTION
RULE
Method 1: Critical Value Approach
Can be done MANUALLY!
 Critical Region
 the area under the curve that contains all the values of
the statistic that allow rejection of 𝐻0

 Critical Value
 the value of the statistic that bounds the critical region

 Test Statistic
 the value generated from sample data which is to be
compared with the critical value/s
STEP 4: IDENTIFY THE REJECTION
RULE
Rejection Rule for t–test on One Sample Mean:
(i.e., denote by 𝑡𝑠𝑡𝑎𝑡 the appropriate test statistic and by 𝑡𝛼, 𝑑𝑓
the appropriate critical value at a significance level 𝛼 and
degrees of freedom df)

Reject 𝑯𝟎 if
o 𝒕𝒔𝒕𝒂𝒕 < −𝒕𝜶, 𝒅𝒇 for a left-tailed test
o 𝒕𝒔𝒕𝒂𝒕 > 𝒕𝜶, 𝒅𝒇 for a right-tailed test
o 𝒕𝒔𝒕𝒂𝒕 < −𝒕𝜶/𝟐, 𝒅𝒇 OR 𝒕𝒔𝒕𝒂𝒕 > 𝒕𝜶/𝟐, 𝒅𝒇 for a two-tailed test
STEP 4: IDENTIFY THE REJECTION
RULE
Rejection Rule for t–test on One Sample Mean:

Left-Tailed Right-Tailed
Test Test

Two-Tailed
STEP 4: IDENTIFY THE REJECTION
RULE
Method 2: p–Value Approach
Only done w/ STAT
 p – Value of the Test SOFTWARES!
 the lowest level (of significance) at which the observed
value of the test statistic is significant
 may be viewed as the strength of evidence (based on the
observed sample) one has against 𝐻0

Rejection Rule for Any Test:

(i.e., for a test [with p–value observed from the collected
sample] at a significance level 𝛼)

Reject 𝑯𝟎 if
o p–value < 𝜶 [*See board for Illustration]
STEP 4: IDENTIFY THE REJECTION
RULE

For the Child’s Speaking Ability Problem:

Rejection Rule: [*See board for Illustration]

 REJECT 𝑯𝟎 if

𝒕𝒔𝒕𝒂𝒕 < −𝒕𝜶, 𝒅𝒇 = −𝒕𝟎.𝟎𝟓, 𝟏𝟒 = −𝟏. 𝟕𝟔

OR

p–value < 𝜶 = 𝟎. 𝟎𝟓
STEP 5: COMPUTE THE TEST
STATISTIC
For tests concerning with one-population mean 𝝁:
 t – test on one sample mean (with df = 𝑛 − 1)

𝒙 − 𝝁𝟎
𝒕𝒔𝒕𝒂𝒕 =
𝒔/ 𝒏

For the Child’s Speaking Ability Problem:

𝟏𝟏. 𝟏𝟑 − 𝟏𝟑
𝒕𝒔𝒕𝒂𝒕 = = −𝟐. 𝟑𝟒
𝟑. 𝟎𝟗𝟎𝟕/ 𝟏𝟓

Aside: 𝒑– 𝒗𝒂𝒍𝒖𝒆 = 𝟎. 𝟎𝟏𝟕𝟑

STEP 6: MAKE A DECISION

For the Child’s Speaking Ability Problem:

𝒕𝒔𝒕𝒂𝒕 = −𝟐. 𝟑𝟒 < 𝒕𝒄𝒓𝒊𝒕 = −𝟏. 𝟕𝟔

OR
𝒑– 𝒗𝒂𝒍𝒖𝒆 = 𝟎. 𝟎𝟏𝟕𝟑 < 𝜶 = 𝟎. 𝟎𝟓
⇒ REJECT 𝑯𝟎
STEP 7: FORM A CONCLUSION

For the Child’s Speaking Ability Problem:

 At 𝛼 = 5%, one REJECTS 𝐻0 . Therefore, one can conclude

that one has sufficient evidence to say that the new
technique proposed by the researcher significantly increases
the ability of children to learn speaking at an earlier age than
usual (i.e., <13 months)
REAL-LIFE SITUATION: EMPLOYEES’
CONCERNS

The table shows the main Employees’ Percentage

reasons why employees Concern
worry and the percentage of Losing Job 19%
employees who give those
reasons. Company going out 13%
of business
Losing employee 12%
Source: USA TODAY: Society retirement savings
of Human Resource
Losing employee 10%
Management (SHRM) benefits (e.g.
health)
Physical security at 9%
work
Company relocating 4%
REAL-LIFE PROBLEM
Suppose that in a recent sample of 1000
employees, 230 said that losing their jobs is the
major reason of concern for them. Can we
conclude that the current percentage of
employees who give “losing their jobs” as their
major reason of concern different from 0.19 from
SHRM?
NULL HYPOTHESIS
 based on some previous research that the person
doing a new study wishes to challenge
 from the viewpoint of the person doing a study,

the null hypothesis is something (s)he doesn’t

believe
 kind of a straw-man hypothesis

that the researcher hopes the data will not

support.
ALTERNATIVE HYPOTHESIS
 the hypothesis that the researcher thinks is true

A test of hypothesis seeks to reject the null

hypothesis and if it succeeds in doing so, the
alternative hypothesis is accepted.
TESTING A VALUE OF THE
POPULATION PROPORTION, P
Suppose there are x  Null and alternative
successes in a random hypothesis
sample of size n drawn
from a normal population.
We wish to test whether  H0 : p = p0
the proportion of successes
in a certain population is  H1 : p > p0; p < p0 ; or
equal to some specified p  p0
value.
 Assumption: The random
sample taken from some
population is sufficiently
large.
CRITICAL VALUES/ CRITICAL REGION

 For a one-tailed test:

Reject H0 if z < -z for a left tailed test
z > z for a right tailed test
 For a two-tailed test:

Reject H0 if z < -z/2 or z > z/2

TEST STATISTIC

pˆ  p 0
z
p0 q0
where n
x
ˆ 
p
n
REAL-LIFE PROBLEM
Suppose that in a recent sample of 1000
employees, 230 said that losing their jobs is the
major reason of concern for them. Can we
conclude that the current percentage of
employees who give “losing their jobs” as their
major reason of concern significantly higher than
0.19 from SHRM? Use 5% level of significance.
HYPOTHESIS TESTING INVOLVING
VARIANCE
TEST STATISTIC
EXAMPLE
 A researcher using a calibration instrument
needs to confirm if the standard deviation of the
measurements using his instrument is at most
0.5 units. If not, the instrument needs
adjustment. During an experiment, he recorded
the following measurements using this
instrument on the same object:
 6.5, 8.5, 7, 8, 7.5, 7.8, 7, 8.1, 7.2
 Does the researcher need to adjust the
calibration instrument? Use 5% level of
significance.