Statistics for Business and Economics

Ninth Edition, Global Edition

Chapter 10
Hypothesis
Testing: Additional
Topics

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Chapter Goals
After completing this chapter, you should be able to:
• Test hypotheses for the difference between two population means
– Two means, matched pairs
– Independent populations, population variances known
– Independent populations, population variances unknown but equal
• Complete a hypothesis test for the difference between two proportions
(large samples)
• Use the F table to find critical F values
• Complete an F test for the equality of two variances

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Two Sample Tests

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Section 10.1 Dependent Samples
Dependent Samples
Tests of the Difference Between Two Normal Population
Means: Dependent Samples
Tests Means of 2 Related Populations
• Paired or matched samples
• Repeated measures (before/after)
• Use difference between paired values:

di = xi − yi

• Assumptions:
– Both Populations Are Normally Distributed
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Test Statistic: Dependent Samples
Population Means, Dependent Samples

For tests of the

The test statistic for the mean
following form: difference is a t value, with n − 1
degrees of freedom:
𝐻0 : 𝜇𝑥 − 𝜇𝑦 ≥ 0 𝑑ሜ
𝐻0 : 𝜇𝑥 − 𝜇𝑦 ≤ 0 𝑡= 𝑠 σ 𝑑𝑖
𝑑 where 𝑑 = 𝑛
𝐻0 : 𝜇𝑥 − 𝜇𝑦 = 0 𝑛

𝑠𝑑 = sample standard dev . of differences

iation

n = the sample size (number of pairs)

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Decision Rules: Matched Pairs
Matched or Paired Samples
Lower-tail test: Upper-tail test: Two-tail test:
𝐻0 : 𝜇𝑥 − 𝜇𝑦 ≥ 0 𝐻0 : 𝜇𝑥 − 𝜇𝑦 ≤ 0 𝐻0 : 𝜇𝑥 − 𝜇𝑦 = 0
𝐻1 : 𝜇𝑥 − 𝜇𝑦 < 0 𝐻1 : 𝜇𝑥 − 𝜇𝑦 > 0 𝐻1 : 𝜇𝑥 − 𝜇𝑦 ≠ 0

𝑑
Where 𝑡 = 𝑠 has 𝑛 − 1 d. f.
𝑑
𝑛
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Matched Pairs Example
• Assume you send your salespeople to a “customer
service” training workshop. Has the training made a
difference in the number of complaints? You collect the
following data: σ𝑑 𝑖
𝑑=
𝑛

= −4.2

σ(𝑑𝑖 − 𝑑)2
𝑠𝑑 =
𝑛−1
= 5.67

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Matched Pairs: Solution
• Has the training made a difference in the number of
complaints (at the 𝛼 = 0.05 level)?
H0 : μx − μy = 0
H1 : μx − μy ≠ 0

𝛼 = .05 𝑑 = −4.2

Critical Value = ±2.776

d. f. = n − 1 = 4 Decision: Do not reject H0

Test Statistic: (t stat is not in the reject region)
𝑑 −4.2 Conclusion: There is not a
𝑡= 𝑠 = = −1.66
𝑑 5.67
𝑛 significant change in the
5
number of complaints.
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Section 10.2 Independent Samples
Population means, independent samples
Tests of the Difference Between Two Normal Population
Means: Dependent Samples
Goal: Form a confidence interval
for the difference between two
population means, 𝜇𝑥 − 𝜇𝑦
• Different populations
– Unrelated
– Independent
▪ Sample selected from one population has no effect on the
sample selected from the other population
– Normally distributed
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Difference Between Two Means

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Sigma Sub x Squared and Sigma Sub
y Squared Known (1 of 2)
Assumptions:
• Samples are randomly and
independently drawn
• both population distributions
are normal
• Population variances are
known

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Sigma Sub x Squared and Sigma Sub
y Squared Known (2 of 2)
2 2
When 𝜎𝑥 and 𝜎𝑦 are known and
both populations are normal, the
variance of 𝑋ሜ − 𝑌ሜ is
𝜎𝑥 2 𝜎𝑦 2
𝜎 2 𝑋−
ሜ 𝑌ሜ = +
𝑛𝑥 𝑛𝑦

…and the random variable

(𝑥lj − 𝑦)
lj − (𝜇𝑋 − 𝜇𝑌 )
𝑍=
𝜎2𝑥 𝜎 2𝑦
+
𝑛𝑋 𝑛𝑌

has a standard normal distribution

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Test Statistic, Sigma Sub x Squared
and Sigma Sub y Squared Known
𝐻0 : 𝜇𝑥 − 𝜇𝑦 = 0

The test statistic for

𝜇𝑥 − 𝜇𝑦 is:
(𝑥lj − 𝑦)
lj
𝑧=
𝜎𝑥 2 𝜎𝑦 2
+
𝑛𝑥 𝑛𝑦

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Hypothesis Tests for Two Population
Means
Two Population Means, Independent Samples

Lower-tail test: Upper-tail test: Two-tail test:

𝐻0 : 𝜇𝑥 ≥ 𝜇𝑦 𝐻0 : 𝜇𝑥 ≤ 𝜇𝑦 𝐻0 : 𝜇𝑥 = 𝜇𝑦
𝐻1 : 𝜇𝑥 < 𝜇𝑦 𝐻1 : 𝜇𝑥 > 𝜇𝑦 𝐻1 : 𝜇𝑥 ≠ 𝜇𝑦

i. e. , i. e. , i. e. ,

𝐻0 : 𝜇𝑥 – 𝜇𝑦 ≥ 0 𝐻0 : 𝜇𝑥 – 𝜇𝑦 ≤ 0 𝐻0 : 𝜇𝑥 – 𝜇𝑦 = 0
𝐻1 : 𝜇𝑥 – 𝜇𝑦 < 0 𝐻1 : 𝜇𝑥 – 𝜇𝑦 > 0 𝐻1 : 𝜇𝑥 – 𝜇𝑦 ≠ 0

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Decision Rules (1 of 2)
Two Population Means, Independent Samples, Variances
Known
Lower-tail test: Upper-tail test: Two-tail test:
𝐻0 : 𝜇𝑥 – 𝜇𝑦 ≥ 0 𝐻0 : 𝜇𝑥 – 𝜇𝑦 ≤ 0 𝐻0 : 𝜇𝑥 – 𝜇𝑦 = 0
𝐻1 : 𝜇𝑥 – 𝜇𝑦 < 0 𝐻1 : 𝜇𝑥 – 𝜇𝑦 > 0 𝐻1 : 𝜇𝑥 – 𝜇𝑦 ≠ 0

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Sigma Sub x Squared and Sigma Sub y
Squared Unknown, Assumed Equal (1 of 2)
Assumptions:
• Samples are randomly and
independently drawn
• Populations are normally
distributed
• Population variances are
unknown but assumed equal

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Sigma Sub x Squared and Sigma Sub y
Squared Unknown, Assumed Equal (2 of 2)
• The population variances are
assumed equal, so use the two
sample standard deviations
and pool them to estimate 𝜎

• use a t value with (𝑛𝑥 + 𝑛𝑦 − 2)

degrees of freedom

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Test Statistic, Sigma Sub x Squared and
Sigma Sub y Squared Unknown, Equal

The test statistic for

𝐻0 : 𝜇𝑥 − 𝜇𝑦 = 0 is:
(𝑥lj − 𝑦)
lj
𝑡=
𝑠𝑝2 𝑠𝑝2
+
𝑛𝑥 𝑛𝑦

Where t has (𝑛1 + 𝑛2 − 2) d.f.,

and

(𝑛𝑥 − 1)𝑠𝑥2 + (𝑛𝑦 − 1)𝑠𝑦2

𝑠𝑝2 =
𝑛𝑥 + 𝑛𝑦 − 2

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Decision Rules (2 of 2)
Two Population Means, Independent Samples, Variances
Unknown
Lower-tail test: Upper-tail test: Two-tail test:
𝐻0 : 𝜇𝑥 – 𝜇𝑦 ≥ 0 𝐻0 : 𝜇𝑥 − 𝜇𝑦 ≤ 0 𝐻0 : 𝜇𝑥 − 𝜇𝑦 = 0
𝐻1 : 𝜇𝑥 – 𝜇𝑦 < 0 𝐻1 : 𝜇𝑥 − 𝜇𝑦 > 0 𝐻1 : 𝜇𝑥 − 𝜇𝑦 ≠ 0

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Pooled Variance t Test: Example
You are a financial analyst for a brokerage firm. Is there a
difference in dividend yield between stocks listed on the NYSE
& NASDAQ? You collect the following data:

Blank NYSE NASDAQ

Number 21 25
Sample mean 3.27 2.53
Sample std dev 1.30 1.16
Assuming both populations are
approximately normal with equal
variances, is there a difference in
average yield 𝛼 = 0.05 ?
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Calculating the Test Statistic
H0 : μ1 − μ2 = 0 i. e. (μ1 = μ2 )
H1 : μ1 − μ2 ≠ 0 i. e. (μ1 ≠ μ2 )

The test statistic is:

(𝑋ሜ 1 − 𝑋ሜ 2 ) (3.27 − 2.53)
𝑡= = = 2.040
1 1 1 1
𝑆𝑝2 + 1.5021 +
𝑛1 𝑛2 21 25

(𝑛1 − 1)𝑆1 2 + (𝑛2 − 1)𝑆2 2 (21 − 1)1.302 + (25 − 1)1.162

𝑆𝑝2 = = = 1.5021
(𝑛1 − 1) + (𝑛2 − 1) (21 − 1) + (25 − 1)

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Solution
H0 : μ1 − μ2 = 0 i. e. μ1 = μ2
H1 : μ1 − μ2 ≠ 0 i. e. μ1 ≠ μ2

α = 0.05
df = 21 + 25 − 2 = 44
Critical Values: t = ±2.0154

Test Statistic: Decision:

3.27 − 2.53 Reject 𝐻0 at 𝛼 = 0.05
𝑡= = 2.040
1 1 Conclusion:
1.5021 +
21 25
There is evidence of a
difference in means.
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Sigma Sub x Squared and Sigma Sub y
Squared Unknown, Assumed Unequal (1 of 2)
Assumptions:
• Samples are randomly and
independently drawn
• Populations are normally
distributed
• Population variances are
unknown and assumed
unequal

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Sigma Sub x Squared and Sigma Sub y
Squared Unknown, Assumed Unequal (2 of 2)
Forming interval estimates:
• The population variances are
assumed unequal, so a pooled
variance is not appropriate
• use a t value with v degrees of
freedom, where
2
𝑠𝑥2 𝑠𝑦2
+
𝑛𝑥 𝑛𝑦
𝑣= 2 2 2
𝑠𝑥2 𝑠𝑦
𝑛𝑥 𝑛𝑦
+
𝑛𝑥 − 1 𝑛𝑦 − 1

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Test Statistic, Sigma Sub x Squared and
Sigma Sub y Squared Unknown, Unequal
The test statistic for
𝐻0 : 𝜇𝑥 − 𝜇𝑦 = 0 is:

𝑥lj − 𝑦lj
𝑡=
2
𝑠𝑥2 𝑠𝑦
+
𝑛𝑋 𝑛𝑌
2
𝑠𝑥2 𝑠𝑦2
+
𝑛𝑥 𝑛𝑦
𝑣= 2 2
Where t has  degrees of freedom: 𝑠𝑥2 𝑠𝑦2
𝑛𝑥 𝑛𝑦
+
𝑛𝑥 − 1 𝑛𝑦 − 1

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Section 10.3 Two Population
Proportions
Population proportions
Tests of the Difference Between Two Population Proportions
(Large Samples)

Goal: Test hypotheses for the

difference between two population
proportions, 𝑃𝑥 − 𝑃𝑦

Assumptions:
Both sample sizes are large,
𝑛𝑃 1 − 𝑃 > 5

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Two Population Proportions
Population proportions
• The random variable
𝑝Ƹ𝑥 − 𝑝Ƹ𝑦 − 𝑃𝑥 − 𝑃𝑦
𝑍=
𝑃𝑥 1 − 𝑃𝑥 𝑃𝑦 1 − 𝑃𝑦
+
𝑛𝑥 𝑛𝑦

has a standard normal distribution

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Test Statistic for Two Population
Proportions
Population proportions
The test statistic for
𝐻0 : 𝑃𝑥 − 𝑃𝑦 = 0

is a z value:
𝑝Ƹ𝑥 − 𝑝Ƹ𝑦
𝑧=
𝑝Ƹ0 1 − 𝑝Ƹ0 𝑝Ƹ 1 − 𝑝Ƹ0
+ 0
𝑛𝑥 𝑛𝑦

𝑛𝑥 𝑝Ƹ𝑥 + 𝑛𝑦 𝑝Ƹ𝑦
𝑝Ƹ0 =
Where 𝑛𝑥 + 𝑛𝑦

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Decision Rules: Proportions
Population proportions
Lower-tail test: Upper-tail test: Two-tail test:
𝐻0 : 𝑃𝑥 − 𝑃𝑦 ≥ 0 𝐻0 : 𝑃𝑥 − 𝑃𝑦 ≤ 0 𝐻0 : 𝑃𝑥 − 𝑃𝑦 = 0
𝐻1 : 𝑃𝑥 − 𝑃𝑦 < 0 𝐻1 : 𝑃𝑥 − 𝑃𝑦 > 0 𝐻1 : 𝑃𝑥 − 𝑃𝑦 ≠ 0

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Example 1: Two Population
Proportions (1 of 3)
Is there a significant difference between the
proportion of men and the proportion of
women who will vote Yes on Proposition A?

• In a random sample, 36 of 72 men and 31 of

50 women indicated they would vote Yes
• Test at the .05 level of significance

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Example 1: Two Population
Proportions (2 of 3)
• The hypothesis test is:
𝐻0 : 𝑃𝑀 − 𝑃𝑊 = 0 (the two proportions are equal)
𝐻1 : 𝑃𝑀 − 𝑃𝑊 ≠ 0 (there is a significant difference between proportions)
• The sample proportions are:
36
𝑝Ƹ𝑀 = = .50
– Men: 72
31
𝑝Ƹ𝑊 = = .62
– Women: 50

• The estimate for the common overall proportion is:

36 31
𝑛𝑀 𝑝Ƹ𝑀 + 𝑛𝑊 𝑝Ƹ𝑊 72 + 50
𝑝Ƹ0 = = 72 50 = 67 = .549
𝑛𝑀 + 𝑛𝑊 72 + 50 122

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Example 1: Two Population
Proportions (3 of 3)
The test statistic for 𝑃𝑀 − 𝑃𝑊 = 0 is:

𝑝Ƹ𝑀 − 𝑝Ƹ𝑊
𝑧=
𝑝Ƹ0 1 − 𝑝Ƹ0 𝑝Ƹ 1 − 𝑝Ƹ0
+ 0
𝑛1 𝑛2

.50 − .62
=
.549 1 − .549 .549 1 − .549
+
72 50 Decision: Do not reject H0
Conclusion: There is not
= −1.31
significant evidence of a
difference between men
Critical Values = ±1.96
and women in proportions
For α = .05 who will vote yes.
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Section 10.4 Tests of Equality of Two
Variances
• Goal: Test hypotheses about two
population variances
𝐻0 : 𝜎𝑥2 ≥ 𝜎𝑦2
𝐻1 : 𝜎𝑥2 < 𝜎𝑦2 Lower-tail test

𝐻0 : 𝜎𝑥2 ≤ 𝜎𝑦2
𝐻1 : 𝜎𝑥2 > 𝜎𝑦2 Upper-tail test

𝐻0 : 𝜎𝑥2 = 𝜎𝑦2
𝐻1 : 𝜎𝑥2 ≠ 𝜎𝑦2 Two-tail test

The two populations are assumed to be

independent and normally distributed
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Hypothesis Tests for Two Variances
The random variable
𝑠𝑥2
𝜎𝑥2
𝐹= 2
𝑠𝑦
𝜎𝑦2

Has an F distribution with 𝑛𝑥 − 1

numerator degrees of freedom and
𝑛𝑦 − 1
denominator degrees of
freedom
Denote an F value with 𝑣1 numerator and 𝑣2
denominator degrees of freedom by 𝐹𝑣1,𝑣2
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Test Statistic
The critical value for a hypothesis test
about two population variances is

𝑠𝑥2
𝐹= 2
𝑠𝑦

where F has 𝑛𝑥 − 1 numerator

degrees of freedom and 𝑛𝑦 − 1
denominator degrees of freedom

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Decision Rules: Two Variances
2
Use 𝑠𝑥 to denote the larger variance. 𝐻0 : 𝜎𝑥2 = 𝜎𝑦2
𝐻0 : 𝜎𝑥2 ≤ 𝜎𝑦2 𝐻1 : 𝜎𝑥2 ≠ 𝜎𝑦2
𝐻1 : 𝜎𝑥2 > 𝜎𝑦2

• rejection region for a two-tail

test is:

Reject 𝐻0 if 𝐹 > 𝐹𝑛𝑥 −1,𝑛𝑦−1,𝛼 Reject H 0 if F  Fn −1,n 

x y −1,
2 2
where 𝑠𝑥 is the larger of
the two sample variances
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Example 2: F Test
You are a financial analyst for a brokerage firm. You
want to compare dividend yields between stocks listed
on the NYSE & NASDAQ. You collect the following data:

Blank NYSE NASDAQ

Number 21 25
Mean 3.27 2.53
Std dev 1.30 1.16

Is there a difference in the

variances between the NYSE
NASDAQ at the α = 0.10 level?
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F Test: Example Solution (1 of 2)
• Form the hypothesis test:
𝐻0 : 𝜎𝑥2 = 𝜎𝑦2 (there is no difference between variances)
𝐻1 : 𝜎𝑥2 ≠ 𝜎𝑦2 (there is a difference between variances)
10
• Find the F critical values for α =. :
2

Degrees of Freedom:
• Numerator Fnx −1, ny −1, 
(NYSE has the larger 2
standard deviation):
=𝐹 10 = 2.03
– 𝑛𝑥 − 1 = 21 − 1 = 20 d.f. 20,24,0.
2
• Denominator:
– 𝑛𝑦 − 1 = 25 − 1 = 24 d.f.
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F Test: Example Solution (2 of 2)
• The test statistic is: 𝐻0 : 𝜎𝑥2 = 𝜎𝑦2
𝐻1 : 𝜎𝑥2 ≠ 𝜎𝑦2

• F = 1.256 is not in the rejection

region, so we do not reject 𝐻0

• Conclusion: There is not sufficient evidence

of a difference in variances at α = .10
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Some Comments on Hypothesis
Testing
• A test with low power can result from:
– Small sample size
– Large variances in the underlying populations
– Poor measurement procedures
• If sample sizes are large it is possible to find
significant differences that are not practically
important
• Researchers should select the appropriate level of
significance before computing p-values

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Two-Sample Tests in Excel
For paired samples (t test):
– Data data analysis 𝑡 − test: paired two sample for means

For independent samples:

• Independent sample z test with variances known:
– Data data analysis 𝑧 − test: two sample for means

For variances…
• F test for two variances:
– Data data analysis 𝐹 − test: two sample for variances

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Chapter Summary (1 of 2)
• Compared two dependent samples (paired
samples)
– Performed paired sample t test for the mean difference
• Compared two independent samples
– Performed z test for the differences in two means
– Performed pooled variance t test for the differences in
two means
• Compared two population proportions
– Performed z-test for two population proportions

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Chapter Summary (2 of 2)
• Performed F tests for the difference between two
population variances
• Used the F table to find F critical values

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