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Tests of Hypothesis

Sampling Theory
Population: A statistical population is the set of all possible measurements on data corresponding to the entire collection of units for which an inference is to be made. Another definition: Population is an aggregate of objects, animate or inanimate, under study. Population may be finite or infinite. Complete enumeration of population in impracticable.

A sample is a finite subset of population which is collected to draw an inference about the population. The process of selection of such samples is called sampling.

Parameter and Statistic

Statistical measures calculated on the basis of population are called parameters. Corresponding measures computed on the basis of sample observations are called statistics. Example: Mean of a population is a parameter and mean of a sample is a statistic.

Sampling distribution of the statistic

The probability distribution of some statistic of a random sample is called the sampling distribution of the statistic.

Standard Error (S.E)

The standard deviation of a statistic is known as its standard error. Utility of S.E: It forms the basis of the testing of hypothesis. If t is any statistic, then for large samples z=[t-E(t)]/S.E which follows std. Normal distribution.

Estimation and Testing of hypotheses

Some characteristics of the population may be completely unknown and we may like to make a guess about this characteristic entirely on the basis of a random sample drawn from the population. This type of problem is called the problem of estimation.

Some information regarding the characteristic of the population may be known to us and we may like to whether the information can be accepted w.r.to random sample drawn from the population and if it can be accepted, to what degree of confidence it can be accepted. This type of problem is known as the problem of testing of hypotheses.

Statistical Hypotheses
Assumptions which are made about the nature of the population or about the value of some parameter of the population(which may or may not be true) on the basis of a random sample are called statistical hypotheses.

Types of Hypotheses
Null hypothesis: Hypothesis of no difference is called a null hypothesis , that is, a hypothesis which assumes there is no significant difference between sample statistic and population parameter or no difference between two sample statistics is called the null hypothesis. We denote the null hypothesis by H0.

Alternative hypothesis: A hypothesis which is complementary to the null hypothesis is called an alternative hypothesis and is denoted by H1.

Test of hypothesis
A procedure for deciding whether to accept or reject the null hypothesis is called the test of hypothesis.

Test of significance
If 0 is a parameter of the population and is the corresponding sample statistic, then usually there will be some difference between 0 and and this difference is different for different samples, since is based on sample observations. Such a difference which is due to sampling fluctuations is called insignificant difference.

The difference that arises due to the reason that either the sampling procedure is not purely random or that the sample has not been drawn from the given population is known as significant difference. The procedure of testing whether the difference between 0 and is significant or not is called the test of significance.

Critical region and level of significance

A region corresponding to a statistic t in the sample space S which amounts to rejection of null hypothesis is termed as the critical region or the region of rejection. The region complementary to the region of rejection is called the region of acceptance.

The probability that a random value of the statistic t belongs to the critical region is known as the level of siginificance(LOS). It is usually expressed as a percentage.

The levels of significance usually employed in testing of hypotheses are 1% and 5%. The LOS is always fixed in advance before collecting the sample information. In any test, the critical region is represented by a portion of the area under the probability curve of the

Sampling distribution of the test statistic.

Errors in Hypotheses testing

Due to the wrong judgement of LOS, the region of rejection becomes larger and the probability of rejecting a null hypothesis when it is true becomes greater. In this case we arrive at the following two types of errors: Type-I error:Rejecting H0 when it is true. This is similar to a good product

Good product being rejected by a consumer and so Type-I error is also known as producers risk. Type-II error: Accepted H0 when it is false. This error is similar to that of accepted a product of inferior quality and hence it is also known as consumers risk. It may be noted that the probability of committing Type-I error is the LOS.

One-tailed and Two-tailed tests

If 0 is a population parameter and is the corresponding sample statistic and if we set up a null hypothesis H0: 0 = , then the alternative hypothesis H1 will be any one of the following: (i) H1: 0 ;(ii)H1: > 0 ;(iii) H1: < 0.

H1 given in (i) is called a two-tailed alternative hypothesis, whereas H1 given in (ii) is called right-tailed alternative hypothesis and in (iii) is called left-tailed alternative hypothesis. When H0 is tested while H1 is a onetailed alternative(right or left), the test of hypothesis is known as a onetailed test.

When H0 is tested while H1 is twotailed alternative, the test of hypothesis is called a two-tailed test. Note: The application of one-tailed and two-tailed tests depend upon the nature of the alternative hypothesis and the choice of the appropriate H1 depends on the situation and the nature of the problem concerned.

Critical values or significant values

The value of test statistic z which separates the critical region and acceptance region is called the critical value or the significant value of z and is denoted by z. It depends up on(i) the LOS used and (ii) the alternative hypothesis (one tailed or two tailed).