Hypotheses
is
an
assumption/statement
about an unknown population parameter.
Hypotheses testing is the procedure for testing a hypothesis in order to determine whether to accept or reject the statement based on the sample evidence available.
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Null Hypotheses
The assumption which is to be tested is
called Null Hypotheses.
It represents Status quo condition
Equality
is
always
part
of
H0
(e.g. = , , )
It is denoted by Ho or H sub-zero
Example:- Ho : = 500.
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ALTERNATIVE HYPOTHESES
Cases where the null hypotheses is rejected ,its
complementary statement is accepted which is known
as Alternative Hypotheses.
It represent opposite/complement condition of Ho Inequality is always part of H1 (e.g. , , ) It is denoted by H1 or H sub-one Example:- H1 : 500, 500, 500
HYPOTHESIS TESTING
SIGNIFICANCE LEVEL
The level of significance also known as the size of the rejection region or the size of the critical region It is represented by (alpha)
Commonly used significance levels are 0.01,0.05,0.10
HYPOTHESIS TESTING
CRITICAL REGION
The critical region (or rejection region) is the set of all values of the test statistic that cause us to reject the null hypothesis.
HYPOTHESIS TESTING
CRITICAL VALUE
A critical value is any value separating the critical region from the values of the test statistic that does not lead to rejection of the null hypothesis
HYPOTHESIS TESTING
Significance level()0.10
HYPOTHESIS TESTING
TYPES OF ERRORS
Decision Statement ACCEPT REJECT
TRUE
CORRECT
TYPE I ERROR
FALSE
TYPE II ERROR
CORRECT
HYPOTHESIS TESTING
TWO TAIL TEST AND ONE TAIL TEST
Two- tail Test
Lower- tail/left tail Test
Upper- tail/right tail Test
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Two tail test is performed when:
One Tailed(Left or right ) is performed when:
LEFT TAILED
RIGHT TAILED
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State Null and Alternative Hypotheses(H0 & H1) Select Significance Level () Identify Test statistic(z/t)
Formulate Decision Rule
Test a sample to arrive at decision Reject or accept null hypotheses
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DECISION RULES FOR HYPOTHESES TESTING OF MEAN () AND PROPORTIONS () Rules for Rejecting H0 CASE 1 CASE 2 CASE 3
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Before the 1973 oil embargo and subsequent increases in the prices of crude oil, gasoline usage in the USA had grown at a seasonally adjusted rate of 0.57 % /month, with standard deviation of 0.1%. In 15 randomly chosen months, gasoline usage grew at an average of only 0.37%/month . At 0.01
significance level can it be concluded that growth in use of
gasoline had decreased as a result of the embargo and its consequences.
HYPOTHESIS TESTING
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ANSWER
Acceptance Region
Rejection Region
Critical Value
-9.30 -2.624
HYPOTHESIS TESTING
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From a Total of 10,200 loans made by a state employees credit union in the most recent 5 year period ,350 were sampled to determine what proportion was made to women. The sample
showed that 39 % of the loans were made to women employees.
A complete census of loans 5 years ago showed that 41% of the borrowers were women. At significance level of 0.02 ,can you
conclude that the proportion of loans made to women have
changed significantly in the past years.
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ANSWER
Acceptance Region
Rejection Region
Critical Value
-2.33
-0.763
2.33
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HYPOTHESIS TESTING
HYPOTHESES TESTING: TWO SAMPLE TEST
PART 1- TWO SAMPLE TEST OF MEANS (LARGE SAMPLES)
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Sampling distribution of the difference between sample means is used in two sample test. The distribution is made by all possible sample differences of sample means from two different sampling distributions of means.
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Mean of the sampling distribution of the difference between sample means:
Standard error of the difference between two means:
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Block Enterprises, a manufacturer of chips for computers, is
in the process of deciding whether to replace its current
semi-automated assembly line with a fully automatic assembly line. Block gathered some preliminary test data about hourly chip production, which is summarized in the table given, and it would like to know whether it should upgrade its assembly line. State(and test at =0.02) appropriate hypotheses to help Block decide
Mean
Semi Automatic Line Automatic line 198
Variance
32
Sample Size
150
206 29 HYPOTHESIS TESTING
200
21
ANSWER
Acceptance Region
Rejection Region
Critical Value
-2.41
-2.05
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PART 2- TWO SAMPLE TEST OF MEANS (SMALL SAMPLES)
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Small sample sizes refer to n 30. T-distribution is commonly used test statistic. The population variance of samples are assumed to be equal.
Standard errors are estimated based on pooled
estimate of population variance given by.
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A credit insurance organization has developed a new high
tech method to training new sales personnel. The company
sampled 16 employees who were trained the original way and found average daily sales to be $688 and the standard deviation was $ [Link] also sampled 11 employees who were trained using the new method and found average daily sales to be $706 and the sample deviation was $[Link] =0.05,can the company conclude that average daily sales
have increased under the new plan.
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ANSWER
Acceptance Region
Rejection Region
Critical Value
-1.708 -1.54
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PART 3- TWO SAMPLE TEST OF PROPORTIONS
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On Friday, 11 stocks in a random sample of 40 of the roughly 2500 stocks traded on the NYSE advanced; that is the price of the shares advanced. In a sample of 60
NYSE stocks taken on Thursday, 24 advanced. At
=0.10,can you conclude that a smaller proportion of NYSE stocks advanced on Friday than did on Thursday?
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ANSWER
Acceptance Region
Rejection Region
Critical Value
-1.29 -1.28
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PART 4- TWO SAMPLE TEST FOR DEPENDENT SAMPLES
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Aquarius Health club has been advertising a rigorous program for
body conditioning. The club claims that after 1 month in the
program ,the average participant should be able to do eight more push ups in 2 minutes than he/she could do at the start. Does the random sample of 10 program participants given below
support the clubs claims? Use the 0.025 level of significance
Participant
10
Before After
38 45
11 34 24 41
25 39
17 30
38 44
12 30
27 39
32 40
29 41
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ANSWER
Acceptance Region
Rejection Region
Critical Value
2.262
HYPOTHESIS TESTING
2.46
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"The only relevant test of the validity of a hypothesis is comparison of its predictions with experience." Milton Friedman
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ANUDEEP CHINTA (11) ANUSHA (12) ANUSHA (13)
ARIJIT DAS (16)
ASHISH KUMAR (17) AVANISH (18) AVINASH (19) BHANU PRAKASH (20)
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APARAJITA (14)
ARAKANSHU KUMAR (15)
HYPOTHESIS TESTING
