Hypothesis Testing Lecture

Statistics 509
E. A. Pena

Hypothesis Testing 1
 Overview of this Lecture
• The problem of hypotheses testing
• Elements and logic of hypotheses testing (hypotheses,
decision rule, one- and two-tailed tests, significance
level, Type I and Type II errors, power of test,
implications of the decision, p-values)
• Steps in performing a hypotheses test
• Large-sample test for the population mean
• Two-sample tests for the population means
• Large-sample test for the population proportion
• Two-sample tests for the population proportions

Hypothesis Testing 2
 The problem of hypotheses testing
• Statement of the Problem:
• Given a population (equivalently a distribution) with a
parameter of interest, , (which could be the mean,
variance, standard deviation, proportion, etc.), we
would like to decide/choose between two
complementary statements concerning . These
statements are called statistical hypotheses.
• The choice or decision between these hypotheses is to
be based on a sample data taken from the population of
interest.
• The ideal goal is to be able to choose the hypothesis
that is true in reality based on the sample data.
Hypothesis Testing 3
 Situations where Hypotheses Testing is
Relevant
• Example: A quality engineer would like to determine
whether the production process he is charged of
monitoring is still producing products whose mean
response value is supposed to be 0 (process is in-
control), or whether it is producing products whose
mean response value is now different from the required
value of 0 (process is out-of-control).

• Statement 1 (Null):  = 0 (process in-control)

• Statement 2 (Alternative):   0 (process out-of-
control)
Hypothesis Testing 4
 Some Situations …
• Example: An engineer would like to decide which of
two computer chip manufacturers (say, Intel and
Motorola) is more reliable in producing computer
chips. If we denote by p1 the proportion of defective
chips for Intel, and p2 the proportion of defective
chips for Motorola, then the goal is to decide between
the following competing statements:

• Statement 1 (Null): p1 < p2 (Intel is more reliable);

• Statement 2 (Alternative): p1 > p2 (Motorola is more
reliable).

Hypothesis Testing 5
 Elements and Logic of Statistical
Hypotheses Testing
• Consider a population or distribution whose mean is . To
introduce the elements and discuss the logic of hypotheses
testing, we consider the problem of deciding whether  =
0, where 0 is a pre-specified value, or   0.

• The first step in hypotheses testing, which should be done

before you gather your sample data, is to set up your
statistical hypotheses, which are the null hypothesis (H0)
and the alternative hypothesis (H1).

Hypothesis Testing 6
 The Statistical Hypotheses
• The null hypothesis, H0, is usually the hypothesis that
corresponds to the status quo, the standard, the desired
level/amount, or it represents the statement of “no
difference.”

• The alternative hypothesis, H1, on the other hand, is the

complement of H0, and is typically the statement that the
researcher would like to prove or verify.

• These hypotheses are usually set-up in such a way that

deciding in favor of H1 when in fact H0 is the true (called
a Type I error) statement is a very serious mistake.
Hypothesis Testing 7
 An Analogy to Remember
• Setting the null and alternative hypotheses has an
analog in the justice system where the defendant is
“presumed innocent” until “proven guilty.”
• In the court system, the null hypothesis corresponds to
the defendant being innocent (this is the status quo,
the standard, etc.).
• The alternative hypothesis, on the other hand, is that
the defendant is guilty.
• Note that it is very difficult to reject the null (convict
the defendant), and only “a proof (based on good
evidence) beyond a reasonable doubt” will warrant
rejection of H0.
Hypothesis Testing 8
 The Hypotheses in our Problem
• For the problem we are considering, the appropriate
hypotheses will be:

• H0:  = 0
• H1:   0.

• Another word of caution: It is not proper for a

researcher to set up the hypotheses after seeing the
sample data; however, a data maybe used to
generate a hypotheses, but to test these generated
hypotheses you should gather a new set of sample
data!
Hypothesis Testing 9
 Determine the Type of Sample Data that will
be Gathered
• The second step is to determine what kind of sample data
you will be gathering. Is it a simple random sample? A
stratified sample?

• For the moment we will assume that a simple random

sample of size n will be obtained, so the data will be
representable by X1, X2, …, Xn, with n > 30.

• Also, determine if you know the population standard

deviation . We assume for the moment that we do.
Hypothesis Testing 10
 The Decision Rule
• The decision rule is the procedure that states when the null
hypothesis, H0, will be rejected on the basis of the sample
data.

• To specify the decision rule, one specifies a test statistic,

which is a quantity that is computed from the sample data,
and whose sampling distribution under H0 is known or can
be determined. Such a statistic measures the agreement of
the sample data with the null hypothesis specification.

• For our problem, a reasonable choice for the test statistic

is:

Hypothesis Testing 11
 The Test Statistic
X  0
X or equivalently, Z c  .

n
• The latter is a reasonable choice since it measures how far
the sample mean is from the population mean under H0.
The larger the value of |Zc| the more it will indicate that H0
is not true.
• Furthermore, under H0, by virtue of the Central Limit
Theorem, the sampling distribution of Zc will be
approximately standard normal.

Hypothesis Testing 12
When to Reject H0 and its Consequences
• Having decided which test statistic to use, the next step
is to specify the precise situation in which to reject H0.
We have said that it is logical to reject H0 if the absolute
value of Zc is large.
• But how “large” is “large”?
• For the moment, let us specify a critical value, denoted
by C, such that if
• |Zc| > C
• then H0 will be rejected.
• Before deciding on the value of C, let us examine the
consequences of our decision rule.
Hypothesis Testing 13
 Possible Errors of Decision
• Remember at this stage that either H0 is correct, or H1 is
correct. Thus, there is a “true state of reality,” but this
state is not known to us (otherwise we wouldn’t be
performing a test).

• On the other hand, our decision on whether to reject H0

will only be based on partial information, which is the
sample data.

• We may therefore represent in a table the possible

combinations of “states of reality” and “decision based
on the sample” as follows:
Hypothesis Testing 14
 States of Reality and Decisions Made
State of Reality
H0 True H0 False
Decision Do not reject Correct Error in
Made Based H0 Decision Decision
on Sample (Type II error)
Data Reject H0 Error in Correct
According to Decision Decision
Rule (Type I error)

• In decision-making, there is therefore the possibility of

committing an error, which could either be an error of Type I
or an error of Type II.
• Which of these two types of error is more serious??
Hypothesis Testing 15
 Assessing the Two Types of Errors
• From the table in the preceding slide, we have:
• Type I error: committed when H0 is rejected when in
reality it is true.
• Type II error: committed when H0 is not rejected when in
reality it is false.

• Just like in the court trial alluded to earlier, an error of

Type I is considered to be a more serious type of error
(“convicting an innocent man”).
• Therefore, we try to minimize the probability of
committing the Type I error.

Hypothesis Testing 16
 Setting the Probability of a Type I Error
• In trying to minimize, however, the probability of a
Type I error, we encounter an obstacle in that the
probabilities of the Type I and Type II errors are
inversely related. Thus, if we try to make the probability
of a Type I error very, very small, then it will make the
probability of a Type II error quite large.
• As a compromise we therefore specify a maximum
tolerable Type I error probability, called the
significance level, and denoted by , and choose the
critical value C such that the probability of a Type I
error is (at most) equal to .
• This  is conventionally set to 0.10, 0.05, or 0.01.
Hypothesis Testing 17
 Determining the Critical Value, C
• Let us now determine the critical value C in our test.
Recall that our test will reject H0 if |Zc| > C.

• P{Type I Error} = P{reject H0 | H0 true} = P{|Zc| > C |

H0 true}.

• But, under H0, Zc is distributed as standard normal, so if

we want P{Type I error} = , then we should choose
the critical value C to be:

• C = Z/2, which is the value such that P{Z > Z/2} = /2.

Hypothesis Testing 18
 The Resulting Decision Rule
• Given a significance level of , for testing the null
hypothesis H0:  = 0 versus the alternative hypothesis H1:
  0, the appropriate test statistic, under the assumptions
that (a)  is known, and (b) n > 30 is given by:

X  0
Reject H 0 if Z c   z .
 n 2
Hypothesis Testing 19
Data Gathering and Making the Decision
• Having specified the final decision rule, the next step is to
gather the sample data and to compute the sample mean and
the value of Zc.

• If |Zc| > z/2 then H0 is rejected; otherwise, we say that we

“fail to reject H0.”

• Note: If  is not known, then we could replace it in the

formula of Zc by the sample standard deviation S.

• The final step is to make the relevant conclusion.

Hypothesis Testing 20
 On the Conclusion that One Could Make
• The final step in performing a statistical test of
hypotheses is to make the conclusion relevant to the
particular study, that is, not to simply say that “H0 is
rejected” or “H0 is not rejected.”

• When H0 is rejected, then either that a correct decision

has been made, or an error of Type I has been
committed. But since we have controlled the
probability of committing a Type I error (set to ,
which we could tolerate), then we can conclude in this
case that H0 is not true, and hence that H1 is correct.

Hypothesis Testing 21
 On Conclusions … continued
• On the other hand, if we did not reject H0, then either
we are making the correct decision, or we are making a
Type II error.
• However, since we did not control for the Type II error
probability (when we set the Type I error probability to
be , we “closed our eyes to the probability of a Type
II error”), if we do not reject H0, we cannot conclude
that H0 is true. Rather, we could only say that we
“failed to reject H0 on the basis of the available data.”
• This is the basis of the saying that: “you can never
prove a theory, you can only disprove it.”

Hypothesis Testing 22
 Recapitulation: Steps in Hypotheses
Testing
• Step 1: Formulate your null and alternative hypotheses.
• Step 2: Determine the type of sample you will be getting
with regards to sample size, knowledge of the standard
deviation, etc.
• Step 3: Specify your level of significance.
• Step 4: State precisely your decision rule.
• Step 5: Gather your sample data and compute the test
statistic.
• Step 6: Decide and make final conclusions.

Hypothesis Testing 23
 The p-Value Approach
• Another approach to making the decision in hypotheses
testing is to compute the p-value associated with the
observed value of the test statistic.

• By definition, the p-value is the probability of getting

the observed value or more extreme values of the test
statistic under H0.

• In our situation, the p-value would then be:

• p-value = P{|Z| > |zc|} where zc is the observed value of
the test statistic.

Hypothesis Testing 24
 Deciding Based on the p-Value
• If the p-value exceed 0.10, then H0 is not rejected and
we say that the result is not significant.
• If the p-value is between 0.10 and 0.05, we usually say
that the result is almost significant or tending towards
significance.
• If the p-value is between 0.05 and 0.01, we reject H0
and conclude that the result is significant.
• If the p-value is less than 0.01 then H0 is rejected and
conclude that the result is highly significant.
• Or, we may compare the p-value with the level of
significance: if it is smaller, reject H0.
Hypothesis Testing 25
 Illustrative Problems

Example 1: According to the norms for a mechanical aptitude

test, persons who are 18 years old should average 73.2 with a
standard deviation of 8.6. If 45 randomly selected persons of
that age averaged 76.7, test the null hypothesis that the mean
is 73.2 against the alternative hypothesis that the mean is
greater than 73.2 using a 1% level of significance.

Example 2: Five measurements of the tar content of a

certain kind of cigarette yielded 14.5, 14.2, 14.4, 14.3, and
14.6 mg per cigarette. The manufacturer claims that the
average tar content of their cigarette is 14.0. By assuming
normality of the tar content, is the manufacturer’s claim
valid in light of the sample data?
Hypothesis Testing 26
 Example 3: (Two-Sample Problem)
Two training programs: Method A (straight-teaching machine
instruction) and Method B (also involves personal attention
by instructor). The following sample data were obtained.
Method A: 71, 75, 65, 69, 73, 66, 68, 71, 74, 68
Method B: 72, 77, 84, 78, 69, 70, 77, 73, 65, 75

Summary Statistics for these two samples

Variable N Mean Median TrMean StDev SE Mean
MethodA 10 70.00 70.00 70.00 3.37 1.06
MethodB 10 74.00 74.00 73.87 5.40 1.71

Variable Minimum Maximum Q1 Q3

MethodA 65.00 75.00 67.50 73.25
MethodB 65.00 84.00 69.75 77.25

Confidence Interval and test that method B is more effective.

Hypothesis Testing 27
 Here’s the Output from Minitab Using a Two-Sample T-Test
Two Sample T-Test and Confidence Interval

Two sample T for MethodA vs MethodB

N Mean StDev SE Mean

MethodA 10 70.00 3.37 1.1
MethodB 10 74.00 5.40 1.7

95% CI for mu MethodA - mu MethodB: ( -8.2, 0.2)

T-Test mu MethodA = mu MethodB (vs <): T = -1.99 P = 0.031 DF = 18
Both use Pooled StDev = 4.50

Example for Inference for Variance: While performing a strenuous task,

the pulse rate of 25 workers increased on the average by 18.4 beats per
minute with a standard deviation of 4.9 beats per minute.
A) Construct a 95% confidence interval for the population standard
deviation of the increase in pulse rate when performing this task.
B) Test the hypothesis that the population standard deviation of the
increase in pulse rate is 30 beats per minute, versus the hypothesis that
it is less than 30 beats per minute.
Hypothesis Testing 28
 Inference for the Population Proportion
Example 1: In a random sample of 200 claims filed against an insurance
company writing collision insurance on cars, 84 exceeded $1200.

A) Construct a 95% confidence interval for the population proportion (p) of

claims that exceeds $1200 in value.
B) Based on the given data, test the null hypothesis that p < 0.40 versus the
alternative that p > 0.40. Use a 5% level of significance.
C) If we desire a 95% confidence interval for p with margin of error at most
equal to 0.03, how many claims (what sample size) should we examine?

Example 2: Effect of ionizing radiation in preserving horticultural products.

Data: For 180 irradiated garlic bulbs, 153 turned out to be still marketable
after 240 days; while for 180 untreated bulbs, only 119 were still
marketable after the same period of time. Could we conclude that ionizing
radiation improves over no radiation in terms of preserving this type of
garlic bulbs? Use a 5% level of significance.

Hypothesis Testing 29