Testing for Significance: t Test

■ Hypotheses

H 0: β 1 = 0
H a: β 1 ≠ 0

■ Test Statistic

b1 s
t= where sb1 =
sb1 Σ(xi − x)
2

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 Testing for Significance: t Test

■ Rejection Rule

Reject H0 if p-value < α

or t < -tα/ 2 or t > tα/ 2

where:
tα/ 2 is based on a t distribution
with n - 2 degrees of freedom

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 Testing for Significance: t Test

1. Determine the hypotheses. H 0: β 1 = 0

H a: β 1 ≠ 0
α = .05
2. Specify the level of significance.

b1
3. Select the test statistic.t =
sb1

4. State the rejection rule.

Reject H0 if p-value < .05
or |t| > 3.182 (with
3 degrees of freedom)

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 Testing for Significance: t Test

5. Compute the value of the test statistic.

b1 5
t= = = 4.63
sb1 1.08

6. Determine whether to reject H0.

t = 4.541 provides an area of .01 in the upper
tail. Hence, the p-value is less than .02. (Also,
t = 4.63 > 3.182.) We can reject H0.

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 Confidence Interval for β 1

 We can use a 95% confidence interval for β 1 to test

the hypotheses just used in the t test.
 H0 is rejected if the hypothesized value of β 1 is not
included in the confidence interval for β 1.

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 Confidence Interval for β 1

■ The form of a confidence interval for β 1 is: tα / 2 sb1

is the
b1 ± tα / 2 sb1 margin
b1 is the of error
point
where tα / 2 is the t value providing an area
estimat
of α /2 in the upper tail of a t distribution
or
with n - 2 degrees of freedom

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 Confidence Interval for β 1

■ Rejection Rule
Reject H0 if 0 is not included in
the confidence interval for β 1.
■ 95% Confidence Interval for β 1
b1 ± tα / 2=sb15 +/- 3.182(1.08) = 5 +/- 3.44
or 1.56 to 8.44
■ Conclusion
0 is not included in the confidence interval.
Reject H0

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 Testing for Significance: F Test

■ Hypotheses

H 0: β 1 = 0
H a: β 1 ≠ 0
■ Test Statistic

F = MSR/MSE

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 Testing for Significance: F Test

■ Rejection Rule

Reject H0 if
p-value < α
or F > Fα
where:
Fα is based on an F distribution with
1 degree of freedom in the numerator and
n - 2 degrees of freedom in the denominator

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 Testing for Significance: F Test

1. Determine the hypotheses. H 0: β 1 = 0

H a: β 1 ≠ 0

α
2. Specify the level of significance. = .05

3. Select the test statistic.F = MSR/MSE

4. State the rejection rule.

Reject H0 if p-value < .05
or F > 10.13 (with 1 d.f.
in numerator and
3 d.f. in denominator)

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 Testing for Significance: F Test

5. Compute the value of the test statistic.

F = MSR/MSE = 100/4.667 = 21.43

6. Determine whether to reject H0.

F = 17.44 provides an area of .025 in
the upper tail. Thus, the p-value
corresponding to F = 21.43 is less than
2(.025) = .05. Hence,
The statistical we reject
evidence H0.
is sufficient to
conclude
that we have a significant relationship
between the
number of TV ads aired and the number of
cars sold.
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 Some Cautions about the
Interpretation of Significance Tests
 Rejecting H0: β 1 = 0 and concluding that
the
relationship between x and y is significant
does not enable us to conclude that a cause-
and-effect
 Justrelationship
because weisare able to
present β 1=
reject Hx0:and
between y. 0 and
demonstrate statistical significance does not enable
us to conclude that there is a linear relationship
between x and y.

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 Using the Estimated Regression Equation
for Estimation and Prediction
■ Confidence Interval Estimate of
E(yp)
y p ± tα / 2sy p

■ Prediction Interval Estimate of yp

yp ± tα / 2sind

where:
confidence coefficient is 1 - α and
tα /2 is based on a t distribution
with n - 2 degrees of freedom

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 Point Estimation

If 3 TV ads are run prior to a sale, we

expect
the mean number of cars sold to be:
^
y= 10 + 5(3) = 25 cars

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 Confidence Interval for E(yp)

■ yˆpof
Estimate of the Standard Deviation

1 (xp − x)2
syˆp = s +
n ∑ (xi − x)2

1 (3− 2)2
syˆp = 2.16025 +
5 (1− 2)2 + (3− 2)2 + (2 − 2)2 + (1− 2)2 + (3− 2)2

1 1
syˆp = 2.16025 + = 1.4491
5 4

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 Confidence Interval for E(yp)

The 95% confidence interval estimate of the

mean number of cars sold when 3 TV ads
are run is:
y p ± tα / 2sy p

25 + 3.1824(1.4491)
25 + 4.61

20.39 to 29.61 cars

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 Prediction Interval for yp

■ Estimate of the Standard

Deviation
of an Individual Value of yp
1 (xp − x )2

sind = s 1+ +
n ∑ (xi − x)2

1 1
syˆp = 2.16025 1+ +
5 4
syˆp = 2.16025(1.20416) = 2.6013

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 Prediction Interval for yp

The 95% prediction interval estimate of the

number of cars sold in one particular week
when 3 TV ads are run is:

yp ± tα / 2sind

25 + 3.1824(2.6013)
25 + 8.28

16.72 to 33.28 cars

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 Residual Analysis

 If the assumptions about the error term ε appear

questionable, the hypothesis tests about the
significance of the regression relationship and the
interval estimation results may not be valid.
 The residuals provide the best information about ε .
 Residual for Observation i

yi − yˆi

 Much of the residual analysis is based on an

examination of graphical plots.

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 Residual Plot Against x

■ If the assumption that the variance of ε is the

same for all values of x is valid, and the
assumed regression model is an adequate
representation of the relationship between the
variables, then
The residual plot should give an overall
impression of a horizontal band of points

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 Residual Plot Against x

y − yˆ
Good Pattern
Residual

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 Residual Plot Against x

y − yˆ
Nonconstant Variance
Residual

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 Residual Plot Against x

y − yˆ
Model Form Not Adequate
Residual

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 Residual Plot Against x

■ Residuals
Observation Predicted Cars Sold Residuals
1 15 -1
2 25 -1
3 20 -2
4 15 2
5 25 2

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 Residual Plot Against x

TV Ads Residual Plot

3
2
Residuals

1
0
-1
-2
-3
0 1 2 3 4
TV Ads

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 End of Chapter 12

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