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Statistics By Jim

Making statistics intuitive

Hypothesis Testing: Uses, Steps & Example

By Jim Frost 4 Comments

What is Hypothesis Testing?

Hypothesis testing in statistics uses sample data to infer the properties of a whole population . These tests determine whether a random sample provides sufficient evidence to conclude an effect or relationship exists in the population. Researchers use them to help separate genuine population-level effects from false effects that random chance can create in samples. These methods are also known as significance testing.

For example, researchers are testing a new medication to see if it lowers blood pressure. They compare a group taking the drug to a control group taking a placebo. If their hypothesis test results are statistically significant, the medication’s effect of lowering blood pressure likely exists in the broader population, not just the sample studied.

Using Hypothesis Tests

A hypothesis test evaluates two mutually exclusive statements about a population to determine which statement the sample data best supports. These two statements are called the null hypothesis and the alternative hypothesis . The following are typical examples:

• Null Hypothesis : The effect does not exist in the population.
• Alternative Hypothesis : The effect does exist in the population.

Hypothesis testing accounts for the inherent uncertainty of using a sample to draw conclusions about a population, which reduces the chances of false discoveries. These procedures determine whether the sample data are sufficiently inconsistent with the null hypothesis that you can reject it. If you can reject the null, your data favor the alternative statement that an effect exists in the population.

Statistical significance in hypothesis testing indicates that an effect you see in sample data also likely exists in the population after accounting for random sampling error , variability, and sample size. Your results are statistically significant when the p-value is less than your significance level or, equivalently, when your confidence interval excludes the null hypothesis value.

Conversely, non-significant results indicate that despite an apparent sample effect, you can’t be sure it exists in the population. It could be chance variation in the sample and not a genuine effect.

Learn more about Failing to Reject the Null .

5 Steps of Significance Testing

Hypothesis testing involves five key steps, each critical to validating a research hypothesis using statistical methods:

• Formulate the Hypotheses : Write your research hypotheses as a null hypothesis (H 0 ) and an alternative hypothesis (H A ).
• Data Collection : Gather data specifically aimed at testing the hypothesis.
• Conduct A Test : Use a suitable statistical test to analyze your data.
• Make a Decision : Based on the statistical test results, decide whether to reject the null hypothesis or fail to reject it.
• Report the Results : Summarize and present the outcomes in your report’s results and discussion sections.

While the specifics of these steps can vary depending on the research context and the data type, the fundamental process of hypothesis testing remains consistent across different studies.

Let’s work through these steps in an example!

Hypothesis Testing Example

Researchers want to determine if a new educational program improves student performance on standardized tests. They randomly assign 30 students to a control group , which follows the standard curriculum, and another 30 students to a treatment group, which participates in the new educational program. After a semester, they compare the test scores of both groups.

Download the CSV data file to perform the hypothesis testing yourself: Hypothesis_Testing .

The researchers write their hypotheses. These statements apply to the population, so they use the mu (μ) symbol for the population mean parameter .

• Null Hypothesis (H 0 ) : The population means of the test scores for the two groups are equal (μ 1 = μ 2 ).
• Alternative Hypothesis (H A ) : The population means of the test scores for the two groups are unequal (μ 1 ≠ μ 2 ).

Choosing the correct hypothesis test depends on attributes such as data type and number of groups. Because they’re using continuous data and comparing two means, the researchers use a 2-sample t-test .

Here are the results.

The treatment group’s mean is 58.70, compared to the control group’s mean of 48.12. The mean difference is 10.67 points. Use the test’s p-value and significance level to determine whether this difference is likely a product of random fluctuation in the sample or a genuine population effect.

Because the p-value (0.000) is less than the standard significance level of 0.05, the results are statistically significant, and we can reject the null hypothesis. The sample data provides sufficient evidence to conclude that the new program’s effect exists in the population.

Limitations

Hypothesis testing improves your effectiveness in making data-driven decisions. However, it is not 100% accurate because random samples occasionally produce fluky results. Hypothesis tests have two types of errors, both relating to drawing incorrect conclusions.

• Type I error: The test rejects a true null hypothesis—a false positive.
• Type II error: The test fails to reject a false null hypothesis—a false negative.

Learn more about Type I and Type II Errors .

Our exploration of hypothesis testing using a practical example of an educational program reveals its powerful ability to guide decisions based on statistical evidence. Whether you’re a student, researcher, or professional, understanding and applying these procedures can open new doors to discovering insights and making informed decisions. Let this tool empower your analytical endeavors as you navigate through the vast seas of data.

Learn more about the Hypothesis Tests for Various Data Types .

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Reader Interactions

June 10, 2024 at 10:51 am

Thank you, Jim, for another helpful article; timely too since I have started reading your new book on hypothesis testing and, now that we are at the end of the school year, my district is asking me to perform a number of evaluations on instructional programs. This is where my question/concern comes in. You mention that hypothesis testing is all about testing samples. However, I use all the students in my district when I make these comparisons. Since I am using the entire “population” in my evaluations (I don’t select a sample of third grade students, for example, but I use all 700 third graders), am I somehow misusing the tests? Or can I rest assured that my district’s student population is only a sample of the universal population of students?

June 10, 2024 at 1:50 pm

I hope you are finding the book helpful!

Yes, the purpose of hypothesis testing is to infer the properties of a population while accounting for random sampling error.

In your case, it comes down to how you want to use the results. Who do you want the results to apply to?

If you’re summarizing the sample, looking for trends and patterns, or evaluating those students and don’t plan to apply those results to other students, you don’t need hypothesis testing because there is no sampling error. They are the population and you can just use descriptive statistics. In this case, you’d only need to focus on the practical significance of the effect sizes.

On the other hand, if you want to apply the results from this group to other students, you’ll need hypothesis testing. However, there is the complicating issue of what population your sample of students represent. I’m sure your district has its own unique characteristics, demographics, etc. Your district’s students probably don’t adequately represent a universal population. At the very least, you’d need to recognize any special attributes of your district and how they could bias the results when trying to apply them outside the district. Or they might apply to similar districts in your region.

However, I’d imagine your 3rd graders probably adequately represent future classes of 3rd graders in your district. You need to be alert to changing demographics. At least in the short run I’d imagine they’d be representative of future classes.

Think about how these results will be used. Do they just apply to the students you measured? Then you don’t need hypothesis tests. However, if the results are being used to infer things about other students outside of the sample, you’ll need hypothesis testing along with considering how well your students represent the other students and how they differ.

I hope that helps!

June 10, 2024 at 3:21 pm

Thank you so much, Jim, for the suggestions in terms of what I need to think about and consider! You are always so clear in your explanations!!!!

June 10, 2024 at 3:22 pm

You’re very welcome! Best of luck with your evaluations!

Comments and Questions Cancel reply

Calcworkshop

Hypothesis Testing w/ 21 Step-by-Step Examples!

// Last Updated: October 9, 2020 - Watch Video //

In statistical testing, also referred to as hypothesis testing, our goal is to show the credibility of a claim regarding the population.

Jenn, Founder Calcworkshop ® , 15+ Years Experience (Licensed & Certified Teacher)

What Is Hypothesis Testing

Now it would be unreasonable to assume that we can test the entire population to determine the feasibility of every claim one might have.

Thus, we need a way to conclude an assumption is true or false by taking an appropriate sample and calculating a relevant statistic.

And knowing that we must expect that there will be some variation between the sample statistic that is calculated and the true population parameter, leads us to the understanding of statistical inferences (hypotheses).

Hypothesis Testing Steps

First, we must identify the parameter of interest.

Remember that a parameter always points to the population so that it will be either a population mean, population proportion, population slope, or some other population parameter.

Types of Hypothesis Tests

Then we will write a declaration of our significance test, which will include a null hypothesis statement and an alternative hypothesis.

The null hypothesis is the expected value of the population parameter, similar to the status quo, whereas the alternative hypothesis is a statement of negation of the null hypothesis as discussed by Penn State .

Next, we will calculate the desired test statistic from our random sample. This test statistic is a numerical quantity that measures the difference between the observed value and the expected value, divided by the standard error, which is the sample standard deviation.

Then we will compare this test statistic with a specified level of significance (alpha), just like we did with confidence intervals.

If the probability of yielding the sample statistic is as extreme or more extreme is smaller than our significance level, then we declare the sample statistic to be significant and reject the null hypothesis in favor of the alternative. In other words, if the probability is inside our shaded critical region then it is considered more extreme; thus, rejecting the hypothesis. But if it is outside the critical region, we will fail to reject our claim in favor of the alternative.

Null and Alternative Hypothesis

Additionally, we will also learn how to determine whether our study calls for a one or two-tailed test.

Type 1 And Type 2 Errors

Now, with all inferences and tests of significance, there is always room for error. A Type I error occurs if we reject the null hypothesis, when in actuality, the null hypothesis is true. Similarly, if we fail to reject the null hypothesis when, in reality, the null hypothesis is false, this is considered a Type II error .

Type 1 Vs. Type 2 Error

Imagine you are in a court of law, where a defendant is presumed innocent until proven guilty. What possible errors could a jury make regarding the outcome of the trial?

First, let’s state the following:

• The Null Hypothesis: The defendant is innocent.
• The Alternative Hypothesis: the defendant is guilty.

Now, a Type I Error would happen if the jury rejects the null hypothesis as false when, in reality, the null hypothesis is true. In other words, the jury finds the defendant guilty of a crime they didn’t commit.

And a Type II Error is when a jury accepts the null hypothesis as true when, in reality, the null hypothesis is false. Meaning, the defendant is found innocent of a crime they did commit.

Let’s look at an example where we put all of these ideas together.

Worked Example

Imagine we have a textile manufacturer investigating a new yarn, which claims it has a thread elongation of 12 kilograms with a standard deviation of 0.5 kilograms.

Using a random sample of 4 specimens, the manufacturer wishes to test the claim that the mean thread elongation is less than 12 kilograms.

Write a hypothesis statement for this scenario and using a normal distribution, find the Type 1 error if the sample mean is less than 11.5 kilograms.

Type 1 Error — Example

As we can see, from the example above, the likelihood of a type I error, where the manufacturer rejects the null hypothesis when the null hypothesis is actually true, is approximately 0.023 or 2.3% likely.

Together, we will look at these two types of error and how they affect decision-making and begin to explore the notion of a probability value and how it helps us determine the validity or falsity of our claim.

Hypothesis Testing – Lesson & Examples (Video)

1 hr 17 min

• Introduction to Video: Statistical Hypotheses
• 00:00:38 – Overview of Hypothesis Testing and determining a correctly stated hypothesis testing problem (Examples #1-7)
• Exclusive Content for Members Only
• 00:14:34 – State the Null Hypothesis and the Alternative Hypothesis for each scenario (Examples #8-12)
• 00:25:46 – Hypothesis Testing Steps and Overview of Type I and Type II errors (Examples #13-14)
• 00:40:32 – Describe a Type 1 and Type 2 error (Examples #15-16)
• 00:46:32 – Overview of p-value and Tails of the Hypothesis Test
• 00:55:55 – Find the probability of a Type I and Type II error (Example #17)
• 01:06:08 – Identify null hypothesis, alternative hypothesis, and state whether the scenario is a one-tail or two-tailed test (Examples #18-21)
• Practice Problems with Step-by-Step Solutions
• Chapter Tests with Video Solutions

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• Null and Alternative Hypotheses | Definitions & Examples

Null & Alternative Hypotheses | Definitions, Templates & Examples

Published on May 6, 2022 by Shaun Turney . Revised on June 22, 2023.

The null and alternative hypotheses are two competing claims that researchers weigh evidence for and against using a statistical test :

• Null hypothesis ( H 0 ): There’s no effect in the population .
• Alternative hypothesis ( H a or H 1 ) : There’s an effect in the population.

Table of contents

Answering your research question with hypotheses, what is a null hypothesis, what is an alternative hypothesis, similarities and differences between null and alternative hypotheses, how to write null and alternative hypotheses, other interesting articles, frequently asked questions.

The null and alternative hypotheses offer competing answers to your research question . When the research question asks “Does the independent variable affect the dependent variable?”:

• The null hypothesis ( H 0 ) answers “No, there’s no effect in the population.”
• The alternative hypothesis ( H a ) answers “Yes, there is an effect in the population.”

The null and alternative are always claims about the population. That’s because the goal of hypothesis testing is to make inferences about a population based on a sample . Often, we infer whether there’s an effect in the population by looking at differences between groups or relationships between variables in the sample. It’s critical for your research to write strong hypotheses .

You can use a statistical test to decide whether the evidence favors the null or alternative hypothesis. Each type of statistical test comes with a specific way of phrasing the null and alternative hypothesis. However, the hypotheses can also be phrased in a general way that applies to any test.

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The null hypothesis is the claim that there’s no effect in the population.

If the sample provides enough evidence against the claim that there’s no effect in the population ( p ≤ α), then we can reject the null hypothesis . Otherwise, we fail to reject the null hypothesis.

Although “fail to reject” may sound awkward, it’s the only wording that statisticians accept . Be careful not to say you “prove” or “accept” the null hypothesis.

Null hypotheses often include phrases such as “no effect,” “no difference,” or “no relationship.” When written in mathematical terms, they always include an equality (usually =, but sometimes ≥ or ≤).

You can never know with complete certainty whether there is an effect in the population. Some percentage of the time, your inference about the population will be incorrect. When you incorrectly reject the null hypothesis, it’s called a type I error . When you incorrectly fail to reject it, it’s a type II error.

Examples of null hypotheses

The table below gives examples of research questions and null hypotheses. There’s always more than one way to answer a research question, but these null hypotheses can help you get started.

*Note that some researchers prefer to always write the null hypothesis in terms of “no effect” and “=”. It would be fine to say that daily meditation has no effect on the incidence of depression and p 1 = p 2 .

The alternative hypothesis ( H a ) is the other answer to your research question . It claims that there’s an effect in the population.

Often, your alternative hypothesis is the same as your research hypothesis. In other words, it’s the claim that you expect or hope will be true.

The alternative hypothesis is the complement to the null hypothesis. Null and alternative hypotheses are exhaustive, meaning that together they cover every possible outcome. They are also mutually exclusive, meaning that only one can be true at a time.

Alternative hypotheses often include phrases such as “an effect,” “a difference,” or “a relationship.” When alternative hypotheses are written in mathematical terms, they always include an inequality (usually ≠, but sometimes < or >). As with null hypotheses, there are many acceptable ways to phrase an alternative hypothesis.

Examples of alternative hypotheses

The table below gives examples of research questions and alternative hypotheses to help you get started with formulating your own.

Null and alternative hypotheses are similar in some ways:

• They’re both answers to the research question.
• They both make claims about the population.
• They’re both evaluated by statistical tests.

However, there are important differences between the two types of hypotheses, summarized in the following table.

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To help you write your hypotheses, you can use the template sentences below. If you know which statistical test you’re going to use, you can use the test-specific template sentences. Otherwise, you can use the general template sentences.

General template sentences

The only thing you need to know to use these general template sentences are your dependent and independent variables. To write your research question, null hypothesis, and alternative hypothesis, fill in the following sentences with your variables:

Does independent variable affect dependent variable ?

• Null hypothesis ( H 0 ): Independent variable does not affect dependent variable.
• Alternative hypothesis ( H a ): Independent variable affects dependent variable.

Test-specific template sentences

Once you know the statistical test you’ll be using, you can write your hypotheses in a more precise and mathematical way specific to the test you chose. The table below provides template sentences for common statistical tests.

Note: The template sentences above assume that you’re performing one-tailed tests . One-tailed tests are appropriate for most studies.

If you want to know more about statistics , methodology , or research bias , make sure to check out some of our other articles with explanations and examples.

• Normal distribution
• Descriptive statistics
• Measures of central tendency
• Correlation coefficient

Methodology

• Cluster sampling
• Stratified sampling
• Types of interviews
• Cohort study
• Thematic analysis

Research bias

• Implicit bias
• Cognitive bias
• Survivorship bias
• Availability heuristic
• Nonresponse bias
• Regression to the mean

Hypothesis testing is a formal procedure for investigating our ideas about the world using statistics. It is used by scientists to test specific predictions, called hypotheses , by calculating how likely it is that a pattern or relationship between variables could have arisen by chance.

Null and alternative hypotheses are used in statistical hypothesis testing . The null hypothesis of a test always predicts no effect or no relationship between variables, while the alternative hypothesis states your research prediction of an effect or relationship.

The null hypothesis is often abbreviated as H 0 . When the null hypothesis is written using mathematical symbols, it always includes an equality symbol (usually =, but sometimes ≥ or ≤).

The alternative hypothesis is often abbreviated as H a or H 1 . When the alternative hypothesis is written using mathematical symbols, it always includes an inequality symbol (usually ≠, but sometimes < or >).

A research hypothesis is your proposed answer to your research question. The research hypothesis usually includes an explanation (“ x affects y because …”).

A statistical hypothesis, on the other hand, is a mathematical statement about a population parameter. Statistical hypotheses always come in pairs: the null and alternative hypotheses . In a well-designed study , the statistical hypotheses correspond logically to the research hypothesis.

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6a.2 - steps for hypothesis tests, the logic of hypothesis testing section  .

A hypothesis, in statistics, is a statement about a population parameter, where this statement typically is represented by some specific numerical value. In testing a hypothesis, we use a method where we gather data in an effort to gather evidence about the hypothesis.

How do we decide whether to reject the null hypothesis?

• If the sample data are consistent with the null hypothesis, then we do not reject it.
• If the sample data are inconsistent with the null hypothesis, but consistent with the alternative, then we reject the null hypothesis and conclude that the alternative hypothesis is true.

Six Steps for Hypothesis Tests Section  

In hypothesis testing, there are certain steps one must follow. Below these are summarized into six such steps to conducting a test of a hypothesis.

• Set up the hypotheses and check conditions : Each hypothesis test includes two hypotheses about the population. One is the null hypothesis, notated as \(H_0 \), which is a statement of a particular parameter value. This hypothesis is assumed to be true until there is evidence to suggest otherwise. The second hypothesis is called the alternative, or research hypothesis, notated as \(H_a \). The alternative hypothesis is a statement of a range of alternative values in which the parameter may fall. One must also check that any conditions (assumptions) needed to run the test have been satisfied e.g. normality of data, independence, and number of success and failure outcomes.
• Decide on the significance level, \(\alpha \): This value is used as a probability cutoff for making decisions about the null hypothesis. This alpha value represents the probability we are willing to place on our test for making an incorrect decision in regards to rejecting the null hypothesis. The most common \(\alpha \) value is 0.05 or 5%. Other popular choices are 0.01 (1%) and 0.1 (10%).
• Calculate the test statistic: Gather sample data and calculate a test statistic where the sample statistic is compared to the parameter value. The test statistic is calculated under the assumption the null hypothesis is true and incorporates a measure of standard error and assumptions (conditions) related to the sampling distribution.
• Calculate probability value (p-value), or find the rejection region: A p-value is found by using the test statistic to calculate the probability of the sample data producing such a test statistic or one more extreme. The rejection region is found by using alpha to find a critical value; the rejection region is the area that is more extreme than the critical value. We discuss the p-value and rejection region in more detail in the next section.
• Make a decision about the null hypothesis: In this step, we decide to either reject the null hypothesis or decide to fail to reject the null hypothesis. Notice we do not make a decision where we will accept the null hypothesis.
• State an overall conclusion : Once we have found the p-value or rejection region, and made a statistical decision about the null hypothesis (i.e. we will reject the null or fail to reject the null), we then want to summarize our results into an overall conclusion for our test.

We will follow these six steps for the remainder of this Lesson. In the future Lessons, the steps will be followed but may not be explained explicitly.

Step 1 is a very important step to set up correctly. If your hypotheses are incorrect, your conclusion will be incorrect. In this next section, we practice with Step 1 for the one sample situations.

Hypothesis Testing

About hypothesis testing.

Watch the video for a brief overview of hypothesis testing:

Can’t see the video? Click here to watch it on YouTube.

Contents (Click to skip to the section):

What is a Hypothesis?

What is hypothesis testing.

• Hypothesis Testing Examples (One Sample Z Test).
• Hypothesis Test on a Mean (TI 83).

Bayesian Hypothesis Testing.

• More Hypothesis Testing Articles
• Hypothesis Tests in One Picture
• Critical Values

What is the Null Hypothesis?

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A hypothesis is an educated guess about something in the world around you. It should be testable, either by experiment or observation. For example:

• A new medicine you think might work.
• A way of teaching you think might be better.
• A possible location of new species.
• A fairer way to administer standardized tests.

It can really be anything at all as long as you can put it to the test.

What is a Hypothesis Statement?

If you are going to propose a hypothesis, it’s customary to write a statement. Your statement will look like this: “If I…(do this to an independent variable )….then (this will happen to the dependent variable ).” For example:

• If I (decrease the amount of water given to herbs) then (the herbs will increase in size).
• If I (give patients counseling in addition to medication) then (their overall depression scale will decrease).
• If I (give exams at noon instead of 7) then (student test scores will improve).
• If I (look in this certain location) then (I am more likely to find new species).

A good hypothesis statement should:

• Include an “if” and “then” statement (according to the University of California).
• Include both the independent and dependent variables.
• Be testable by experiment, survey or other scientifically sound technique.
• Be based on information in prior research (either yours or someone else’s).
• Have design criteria (for engineering or programming projects).

Hypothesis testing can be one of the most confusing aspects for students, mostly because before you can even perform a test, you have to know what your null hypothesis is. Often, those tricky word problems that you are faced with can be difficult to decipher. But it’s easier than you think; all you need to do is:

• Figure out your null hypothesis,
• State your null hypothesis,
• Choose what kind of test you need to perform,
• Either support or reject the null hypothesis .

If you trace back the history of science, the null hypothesis is always the accepted fact. Simple examples of null hypotheses that are generally accepted as being true are:

• DNA is shaped like a double helix.
• There are 8 planets in the solar system (excluding Pluto).
• Taking Vioxx can increase your risk of heart problems (a drug now taken off the market).

How do I State the Null Hypothesis?

You won’t be required to actually perform a real experiment or survey in elementary statistics (or even disprove a fact like “Pluto is a planet”!), so you’ll be given word problems from real-life situations. You’ll need to figure out what your hypothesis is from the problem. This can be a little trickier than just figuring out what the accepted fact is. With word problems, you are looking to find a fact that is nullifiable (i.e. something you can reject).

Hypothesis Testing Examples #1: Basic Example

A researcher thinks that if knee surgery patients go to physical therapy twice a week (instead of 3 times), their recovery period will be longer. Average recovery times for knee surgery patients is 8.2 weeks.

The hypothesis statement in this question is that the researcher believes the average recovery time is more than 8.2 weeks. It can be written in mathematical terms as: H 1 : μ > 8.2

Next, you’ll need to state the null hypothesis .  That’s what will happen if the researcher is wrong . In the above example, if the researcher is wrong then the recovery time is less than or equal to 8.2 weeks. In math, that’s: H 0 μ ≤ 8.2

Rejecting the null hypothesis

Ten or so years ago, we believed that there were 9 planets in the solar system. Pluto was demoted as a planet in 2006. The null hypothesis of “Pluto is a planet” was replaced by “Pluto is not a planet.” Of course, rejecting the null hypothesis isn’t always that easy— the hard part is usually figuring out what your null hypothesis is in the first place.

Hypothesis Testing Examples (One Sample Z Test)

The one sample z test isn’t used very often (because we rarely know the actual population standard deviation ). However, it’s a good idea to understand how it works as it’s one of the simplest tests you can perform in hypothesis testing. In English class you got to learn the basics (like grammar and spelling) before you could write a story; think of one sample z tests as the foundation for understanding more complex hypothesis testing. This page contains two hypothesis testing examples for one sample z-tests .

One Sample Hypothesis Testing Example: One Tailed Z Test

Watch the video for an example:

A principal at a certain school claims that the students in his school are above average intelligence. A random sample of thirty students IQ scores have a mean score of 112.5. Is there sufficient evidence to support the principal’s claim? The mean population IQ is 100 with a standard deviation of 15.

Step 1: State the Null hypothesis . The accepted fact is that the population mean is 100, so: H 0 : μ = 100.

Step 2: State the Alternate Hypothesis . The claim is that the students have above average IQ scores, so: H 1 : μ > 100. The fact that we are looking for scores “greater than” a certain point means that this is a one-tailed test.

Step 4: State the alpha level . If you aren’t given an alpha level , use 5% (0.05).

Step 5: Find the rejection region area (given by your alpha level above) from the z-table . An area of .05 is equal to a z-score of 1.645.

Step 6: If Step 6 is greater than Step 5, reject the null hypothesis. If it’s less than Step 5, you cannot reject the null hypothesis. In this case, it is more (4.56 > 1.645), so you can reject the null.

One Sample Hypothesis Testing Examples: #3

Watch the video for an example of a two-tailed z-test:

Blood glucose levels for obese patients have a mean of 100 with a standard deviation of 15. A researcher thinks that a diet high in raw cornstarch will have a positive or negative effect on blood glucose levels. A sample of 30 patients who have tried the raw cornstarch diet have a mean glucose level of 140. Test the hypothesis that the raw cornstarch had an effect.

• State the null hypothesis : H 0 :μ=100
• State the alternate hypothesis : H 1 :≠100
• State your alpha level. We’ll use 0.05 for this example. As this is a two-tailed test, split the alpha into two. 0.05/2=0.025
• Find the z-score associated with your alpha level . You’re looking for the area in one tail only . A z-score for 0.75(1-0.025=0.975) is 1.96. As this is a two-tailed test, you would also be considering the left tail (z = 1.96)
•   If Step 5 is less than -1.96 or greater than 1.96 (Step 3), reject the null hypothesis . In this case, it is greater, so you can reject the null.

*This process is made much easier if you use a TI-83 or Excel to calculate the z-score (the “critical value”). See:

• Critical z value TI 83
• Z Score in Excel

Hypothesis Testing Examples: Mean (Using TI 83)

You can use the TI 83 calculator for hypothesis testing, but the calculator won’t figure out the null and alternate hypotheses; that’s up to you to read the question and input it into the calculator.

Example problem : A sample of 200 people has a mean age of 21 with a population standard deviation (σ) of 5. Test the hypothesis that the population mean is 18.9 at α = 0.05.

Step 1: State the null hypothesis. In this case, the null hypothesis is that the population mean is 18.9, so we write: H 0 : μ = 18.9

Step 2: State the alternative hypothesis. We want to know if our sample, which has a mean of 21 instead of 18.9, really is different from the population, therefore our alternate hypothesis: H 1 : μ ≠ 18.9

Step 3: Press Stat then press the right arrow twice to select TESTS.

Step 4: Press 1 to select 1:Z-Test… . Press ENTER.

Step 5: Use the right arrow to select Stats .

Step 6: Enter the data from the problem: μ 0 : 18.9 σ: 5 x : 21 n: 200 μ: ≠μ 0

Step 7: Arrow down to Calculate and press ENTER. The calculator shows the p-value: p = 2.87 × 10 -9

This is smaller than our alpha value of .05. That means we should reject the null hypothesis .

Bayesian Hypothesis Testing: What is it?

Bayesian hypothesis testing helps to answer the question: Can the results from a test or survey be repeated? Why do we care if a test can be repeated? Let’s say twenty people in the same village came down with leukemia. A group of researchers find that cell-phone towers are to blame. However, a second study found that cell-phone towers had nothing to do with the cancer cluster in the village. In fact, they found that the cancers were completely random. If that sounds impossible, it actually can happen! Clusters of cancer can happen simply by chance . There could be many reasons why the first study was faulty. One of the main reasons could be that they just didn’t take into account that sometimes things happen randomly and we just don’t know why.

It’s good science to let people know if your study results are solid, or if they could have happened by chance. The usual way of doing this is to test your results with a p-value . A p value is a number that you get by running a hypothesis test on your data. A P value of 0.05 (5%) or less is usually enough to claim that your results are repeatable. However, there’s another way to test the validity of your results: Bayesian Hypothesis testing. This type of testing gives you another way to test the strength of your results.

Traditional testing (the type you probably came across in elementary stats or AP stats) is called Non-Bayesian. It is how often an outcome happens over repeated runs of the experiment. It’s an objective view of whether an experiment is repeatable. Bayesian hypothesis testing is a subjective view of the same thing. It takes into account how much faith you have in your results. In other words, would you wager money on the outcome of your experiment?

Differences Between Traditional and Bayesian Hypothesis Testing.

Traditional testing (Non Bayesian) requires you to repeat sampling over and over, while Bayesian testing does not. The main different between the two is in the first step of testing: stating a probability model. In Bayesian testing you add prior knowledge to this step. It also requires use of a posterior probability , which is the conditional probability given to a random event after all the evidence is considered.

Arguments for Bayesian Testing.

Many researchers think that it is a better alternative to traditional testing, because it:

• Includes prior knowledge about the data.
• Takes into account personal beliefs about the results.

Arguments against.

• Including prior data or knowledge isn’t justifiable.
• It is difficult to calculate compared to non-Bayesian testing.

Back to top

Hypothesis Testing Articles

• What is Ad Hoc Testing?
• Composite Hypothesis Test
• What is a Rejection Region?
• What is a Two Tailed Test?
• How to Decide if a Hypothesis Test is a One Tailed Test or a Two Tailed Test.
• How to Decide if a Hypothesis is a Left Tailed Test or a Right-Tailed Test.
• How to State the Null Hypothesis in Statistics.
• How to Find a Critical Value .
• How to Support or Reject a Null Hypothesis.

Specific Tests:

• Brunner Munzel Test (Generalized Wilcoxon Test).
• Chi Square Test for Normality.
• Cochran-Mantel-Haenszel Test.
• Granger Causality Test .
• Hotelling’s T-Squared.
• KPSS Test .
• What is a Likelihood-Ratio Test?
• Log rank test .
• MANCOVA Assumptions.
• MANCOVA Sample Size.
• Marascuilo Procedure
• Rao’s Spacing Test
• Rayleigh test of uniformity.
• Sequential Probability Ratio Test.
• How to Run a Sign Test.
• T Test: one sample.
• T-Test: Two sample .
• Welch’s ANOVA .
• Welch’s Test for Unequal Variances .
• Z-Test: one sample .
• Z Test: Two Proportion.
• Wald Test .

Related Articles:

• What is an Acceptance Region?
• How to Calculate Chebyshev’s Theorem.
• Contrast Analysis
• Decision Rule.
• Degrees of Freedom .
• Directional Test
• False Discovery Rate
• How to calculate the Least Significant Difference.
• Levels in Statistics.
• How to Calculate Margin of Error.
• Mean Difference (Difference in Means)
• The Multiple Testing Problem .
• What is the Neyman-Pearson Lemma?
• What is an Omnibus Test?
• One Sample Median Test .
• How to Find a Sample Size (General Instructions).
• Sig 2(Tailed) meaning in results
• What is a Standardized Test Statistic?
• How to Find Standard Error
• Standardized values: Example.
• How to Calculate a T-Score.
• T-Score Vs. a Z.Score.
• Testing a Single Mean.
• Unequal Sample Sizes.
• Uniformly Most Powerful Tests.
• How to Calculate a Z-Score.

9.4 Full Hypothesis Test Examples

Tests on means, example 9.8.

Jeffrey, as an eight-year old, established a mean time of 16.43 seconds for swimming the 25-yard freestyle, with a standard deviation of 0.8 seconds . His dad, Frank, thought that Jeffrey could swim the 25-yard freestyle faster using goggles. Frank bought Jeffrey a new pair of expensive goggles and timed Jeffrey for 15 25-yard freestyle swims . For the 15 swims, Jeffrey's mean time was 16 seconds. Frank thought that the goggles helped Jeffrey to swim faster than the 16.43 seconds. Conduct a hypothesis test using a preset α = 0.05. Assume that the swim times for the 25-yard freestyle are normal.

Set up the Hypothesis Test:

Since the problem is about a mean, this is a test of a single population mean .

H 0 : μ = 16.43   H a : μ < 16.43

For Jeffrey to swim faster, his time will be less than 16.43 seconds. The "<" tells you this is left-tailed.

Determine the distribution needed:

Random variable: X ¯ X ¯ = the mean time to swim the 25-yard freestyle.

Distribution for the test: X ¯ X ¯ is normal (population standard deviation is known: σ = 0.8)

X ¯ ~ N ( μ , σ X n ) X ¯ ~ N ( μ , σ X n ) Therefore, X ¯ ~ N ( 16.43 , 0.8 15 ) X ¯ ~ N ( 16.43 , 0.8 15 )

μ = 16.43 comes from H 0 and not the data. σ = 0.8, and n = 15.

Calculate the p -value using the normal distribution for a mean:

p -value = P ( x ¯ x ¯ < 16) = 0.0187 where the sample mean in the problem is given as 16.

p -value = 0.0187 (This is called the actual level of significance .) The p -value is the area to the left of the sample mean is given as 16.

μ = 16.43 comes from H 0 . Our assumption is μ = 16.43.

Interpretation of the p -value: If H 0 is true , there is a 0.0187 probability (1.87%)that Jeffrey's mean time to swim the 25-yard freestyle is 16 seconds or less. Because a 1.87% chance is small, the mean time of 16 seconds or less is unlikely to have happened randomly. It is a rare event.

Compare α and the p -value:

α = 0.05 p -value = 0.0187 α > p -value

Make a decision: Since α > α > p -value, reject H 0 .

This indicates that you reject the null hypothesis that the mean time to swim the 25-yard freestyle is at least 16.43 seconds.

Conclusion: At the 5% significance level, there is sufficient evidence that Jeffrey's mean time to swim the 25-yard freestyle is less than 16.43 seconds. Thus, based on the sample data, we conclude that Jeffrey swims faster using the new goggles.

The Type I and Type II errors for this problem are as follows: The Type I error is to conclude that Jeffrey swims the 25-yard freestyle, on average, in less than 16.43 seconds when, in fact, he actually swims the 25-yard freestyle, on average, in at least 16.43 seconds. (Reject the null hypothesis when the null hypothesis is true.)

The Type II error is that there is not evidence to conclude that Jeffrey swims the 25-yard freestyle, on average, in less than 16.43 seconds when, in fact, he actually does swim the 25-yard free-style, on average, in less than 16.43 seconds. (Do not reject the null hypothesis when the null hypothesis is false.)

The mean throwing distance of a football for Marco, a high school quarterback, is 40 yards, with a standard deviation of two yards. The team coach tells Marco to adjust his grip to get more distance. The coach records the distances for 20 throws. For the 20 throws, Marco’s mean distance was 45 yards. The coach thought the different grip helped Marco throw farther than 40 yards. Conduct a hypothesis test using a preset α = 0.05. Assume the throw distances for footballs are normal.

First, determine what type of test this is, set up the hypothesis test, find the p -value, sketch the graph, and state your conclusion.

Example 9.9

Jasmine has just begun her new job on the sales force of a very competitive company. In a sample of 16 sales calls it was found that she closed the contract for an average value of 108 dollars with a standard deviation of 12 dollars. Test at 5% significance that the population mean is at least 100 dollars against the alternative that it is less than 100 dollars. Company policy requires that new members of the sales force must exceed an average of $100 per contract during the trial employment period. Can we conclude that Jasmine has met this requirement at the significance level of 95%?

• H 0 : µ ≤ 100 H a : µ > 100 The null and alternative hypothesis are for the parameter µ because the number of dollars of the contracts is a continuous random variable. Also, this is a one-tailed test because the company has only an interested if the number of dollars per contact is below a particular number not "too high" a number. This can be thought of as making a claim that the requirement is being met and thus the claim is in the alternative hypothesis.
• Test statistic: t c = x ¯ − µ 0 s n = 108 − 100 ( 12 16 ) = 2.67 t c = x ¯ − µ 0 s n = 108 − 100 ( 12 16 ) = 2.67
• Critical value: t a = 1.753 t a = 1.753 with n-1 degrees of freedom= 15

The test statistic is a Student's t because the sample size is below 30; therefore, we cannot use the normal distribution. Comparing the calculated value of the test statistic and the critical value of t t ( t a ) ( t a ) at a 5% significance level, we see that the calculated value is in the tail of the distribution. Thus, we conclude that 108 dollars per contract is significantly larger than the hypothesized value of 100 and thus we cannot accept the null hypothesis. There is evidence that supports Jasmine's performance meets company standards.

It is believed that a stock price for a particular company will grow at a rate of $5 per week with a standard deviation of $1. An investor believes the stock won’t grow as quickly. The changes in stock price is recorded for ten weeks and are as follows: $4, $3, $2, $3, $1, $7, $2, $1, $1, $2. Perform a hypothesis test using a 5% level of significance. State the null and alternative hypotheses, state your conclusion, and identify the Type I errors.

Example 9.10

A manufacturer of salad dressings uses machines to dispense liquid ingredients into bottles that move along a filling line. The machine that dispenses salad dressings is working properly when 8 ounces are dispensed. Suppose that the average amount dispensed in a particular sample of 35 bottles is 7.91 ounces with a variance of 0.03 ounces squared, s 2 s 2 . Is there evidence that the machine should be stopped and production wait for repairs? The lost production from a shutdown is potentially so great that management feels that the level of significance in the analysis should be 99%.

Again we will follow the steps in our analysis of this problem.

STEP 1 : Set the Null and Alternative Hypothesis. The random variable is the quantity of fluid placed in the bottles. This is a continuous random variable and the parameter we are interested in is the mean. Our hypothesis therefore is about the mean. In this case we are concerned that the machine is not filling properly. From what we are told it does not matter if the machine is over-filling or under-filling, both seem to be an equally bad error. This tells us that this is a two-tailed test: if the machine is malfunctioning it will be shutdown regardless if it is from over-filling or under-filling. The null and alternative hypotheses are thus:

STEP 2 : Decide the level of significance and draw the graph showing the critical value.

This problem has already set the level of significance at 99%. The decision seems an appropriate one and shows the thought process when setting the significance level. Management wants to be very certain, as certain as probability will allow, that they are not shutting down a machine that is not in need of repair. To draw the distribution and the critical value, we need to know which distribution to use. Because this is a continuous random variable and we are interested in the mean, and the sample size is greater than 30, the appropriate distribution is the normal distribution and the relevant critical value is 2.575 from the normal table or the t-table at 0.005 column and infinite degrees of freedom. We draw the graph and mark these points.

STEP 3 : Calculate sample parameters and the test statistic. The sample parameters are provided, the sample mean is 7.91 and the sample variance is .03 and the sample size is 35. We need to note that the sample variance was provided not the sample standard deviation, which is what we need for the formula. Remembering that the standard deviation is simply the square root of the variance, we therefore know the sample standard deviation, s, is 0.173. With this information we calculate the test statistic as -3.07, and mark it on the graph.

STEP 4 : Compare test statistic and the critical values Now we compare the test statistic and the critical value by placing the test statistic on the graph. We see that the test statistic is in the tail, decidedly greater than the critical value of 2.575. We note that even the very small difference between the hypothesized value and the sample value is still a large number of standard deviations. The sample mean is only 0.08 ounces different from the required level of 8 ounces, but it is 3 plus standard deviations away and thus we cannot accept the null hypothesis.

STEP 5 : Reach a Conclusion

Three standard deviations of a test statistic will guarantee that the test will fail. The probability that anything is within three standard deviations is almost zero. Actually it is 0.0026 on the normal distribution, which is certainly almost zero in a practical sense. Our formal conclusion would be “ At a 99% level of significance we cannot accept the hypothesis that the sample mean came from a distribution with a mean of 8 ounces” Or less formally, and getting to the point, “At a 99% level of significance we conclude that the machine is under filling the bottles and is in need of repair”.

Try It 9.10

A company records the mean time of employees working in a day. The mean comes out to be 475 minutes, with a standard deviation of 45 minutes. A manager recorded times of 20 employees. The times of working were (frequencies are in parentheses) 460(3); 465(2); 470(3); 475(1); 480(6); 485(3); 490(2).

Conduct a hypothesis test using a 2.5% level of significance to determine if the mean time is more than 475 .

Hypothesis Test for Proportions

Just as there were confidence intervals for proportions, or more formally, the population parameter p of the binomial distribution, there is the ability to test hypotheses concerning p .

The population parameter for the binomial is p . The estimated value (point estimate) for p is p′ where p′ = x/n , x is the number of successes in the sample and n is the sample size.

When you perform a hypothesis test of a population proportion p , you take a simple random sample from the population. The conditions for a binomial distribution must be met, which are: there are a certain number n of independent trials meaning random sampling, the outcomes of any trial are binary, success or failure, and each trial has the same probability of a success p . The shape of the binomial distribution needs to be similar to the shape of the normal distribution. To ensure this, the quantities np′ and nq′ must both be greater than five ( np′ > 5 and nq′ > 5). In this case the binomial distribution of a sample (estimated) proportion can be approximated by the normal distribution with μ = np μ = np and σ = npq σ = npq . Remember that q = 1 – p q = 1 – p . There is no distribution that can correct for this small sample bias and thus if these conditions are not met we simply cannot test the hypothesis with the data available at that time. We met this condition when we first were estimating confidence intervals for p .

Again, we begin with the standardizing formula modified because this is the distribution of a binomial.

Substituting p 0 p 0 , the hypothesized value of p , we have:

This is the test statistic for testing hypothesized values of p , where the null and alternative hypotheses take one of the following forms:

The decision rule stated above applies here also: if the calculated value of Z c shows that the sample proportion is "too many" standard deviations from the hypothesized proportion, the null hypothesis cannot be accepted. The decision as to what is "too many" is pre-determined by the analyst depending on the level of significance required in the test.

Example 9.11

The mortgage department of a large bank is interested in the nature of loans of first-time borrowers. This information will be used to tailor their marketing strategy. They believe that 50% of first-time borrowers take out smaller loans than other borrowers. They perform a hypothesis test to determine if the percentage is the same or different from 50% . They sample 100 first-time borrowers and find 53 of these loans are smaller that the other borrowers. For the hypothesis test, they choose a 5% level of significance.

STEP 1 : Set the null and alternative hypothesis.

H 0 : p = 0.50   H a : p ≠ 0.50

The words "is the same or different from" tell you this is a two-tailed test. The Type I and Type II errors are as follows: The Type I error is to conclude that the proportion of borrowers is different from 50% when, in fact, the proportion is actually 50%. (Reject the null hypothesis when the null hypothesis is true). The Type II error is there is not enough evidence to conclude that the proportion of first time borrowers differs from 50% when, in fact, the proportion does differ from 50%. (You fail to reject the null hypothesis when the null hypothesis is false.)

STEP 2 : Decide the level of significance and draw the graph showing the critical value

The level of significance has been set by the problem at the 5% level. Because this is two-tailed test one-half of the alpha value will be in the upper tail and one-half in the lower tail as shown on the graph. The critical value for the normal distribution at the 95% level of confidence is 1.96. This can easily be found on the student’s t-table at the very bottom at infinite degrees of freedom remembering that at infinity the t-distribution is the normal distribution. Of course the value can also be found on the normal table but you have go looking for one-half of 95 (0.475) inside the body of the table and then read out to the sides and top for the number of standard deviations.

STEP 3 : Calculate the sample parameters and critical value of the test statistic.

The test statistic is a normal distribution, Z, for testing proportions and is:

For this case, the sample of 100 found 53 of these loans were smaller than those of other borrowers. The sample proportion, p′ = 53/100= 0.53 The test question, therefore, is : “Is 0.53 significantly different from .50?” Putting these values into the formula for the test statistic we find that 0.53 is only 0.60 standard deviations away from .50. This is barely off of the mean of the standard normal distribution of zero. There is virtually no difference from the sample proportion and the hypothesized proportion in terms of standard deviations.

STEP 4 : Compare the test statistic and the critical value.

The calculated value is well within the critical values of ± 1.96 standard deviations and thus we cannot reject the null hypothesis. To reject the null hypothesis we need significant evident of difference between the hypothesized value and the sample value. In this case the sample value is very nearly the same as the hypothesized value measured in terms of standard deviations.

STEP 5 : Reach a conclusion

The formal conclusion would be “At a 5% level of significance we cannot reject the null hypothesis that 50% of first-time borrowers take out smaller loans than other borrowers.” Notice the length to which the conclusion goes to include all of the conditions that are attached to the conclusion. Statisticians, for all the criticism they receive, are careful to be very specific even when this seems trivial. Statisticians cannot say more than they know, and the data constrain the conclusion to be within the metes and bounds of the data.

Try It 9.11

A teacher believes that 85% of students in the class will want to go on a field trip to the local zoo. The teacher performs a hypothesis test to determine if the percentage is the same or different from 85%. The teacher samples 50 students and 39 reply that they would want to go to the zoo. For the hypothesis test, use a 1% level of significance.

Example 9.12

Suppose a consumer group suspects that the proportion of households that have three or more cell phones is 30%. A cell phone company has reason to believe that the proportion is not 30%. Before they start a big advertising campaign, they conduct a hypothesis test. Their marketing people survey 150 households with the result that 43 of the households have three or more cell phones.

Here is an abbreviate version of the system to solve hypothesis tests applied to a test on a proportions.

Try It 9.12

Marketers believe that 92% of adults in the United States own a cell phone. A cell phone manufacturer believes that number is actually lower. 200 American adults are surveyed, of which, 174 report having cell phones. Use a 5% level of significance. State the null and alternative hypothesis, find the p -value, state your conclusion, and identify the Type I and Type II errors.

Example 9.13

The National Institute of Standards and Technology provides exact data on conductivity properties of materials. Following are conductivity measurements for 11 randomly selected pieces of a particular type of glass.

1.11; 1.07; 1.11; 1.07; 1.12; 1.08; .98; .98; 1.02; .95; .95 Is there convincing evidence that the average conductivity of this type of glass is greater than one? Use a significance level of 0.05.

Let’s follow a four-step process to answer this statistical question.

• H 0 : μ ≤ 1
• H a : μ > 1
• Plan : We are testing a sample mean without a known population standard deviation with less than 30 observations. Therefore, we need to use a Student's-t distribution. Assume the underlying population is normal.
• Do the calculations and draw the graph .
• State the Conclusions : We cannot accept the null hypothesis. It is reasonable to state that the data supports the claim that the average conductivity level is greater than one.

Try It 9.13

The boiling point of a specific liquid is measured for 15 samples, and the boiling points are obtained as follows:

205; 206; 206; 202; 199; 194; 197; 198; 198; 201; 201; 202; 207; 211; 205

Is there convincing evidence that the average boiling point is greater than 200? Use a significance level of 0.1. Assume the population is normal.

Example 9.14

In a study of 420,019 cell phone users, 172 of the subjects developed brain cancer. Test the claim that cell phone users developed brain cancer at a greater rate than that for non-cell phone users (the rate of brain cancer for non-cell phone users is 0.0340%). Since this is a critical issue, use a 0.005 significance level. Explain why the significance level should be so low in terms of a Type I error.

• H 0 : p ≤ 0.00034
• H a : p > 0.00034

If we commit a Type I error, we are essentially accepting a false claim. Since the claim describes cancer-causing environments, we want to minimize the chances of incorrectly identifying causes of cancer.

• We will be testing a sample proportion with x = 172 and n = 420,019. The sample is sufficiently large because we have np' = 420,019(0.00034) = 142.8, nq' = 420,019(0.99966) = 419,876.2, two independent outcomes, and a fixed probability of success p' = 0.00034. Thus we will be able to generalize our results to the population.

Try It 9.14

In a study of 390,000 moisturizer users, 138 of the subjects developed skin diseases. Test the claim that moisturizer users developed skin diseases at a greater rate than that for non-moisturizer users (the rate of skin diseases for non-moisturizer users is 0.041%). Since this is a critical issue, use a 0.005 significance level. Explain why the significance level should be so low in terms of a Type I error.

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• Publication date: Dec 13, 2023
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Hypothesis Testing

Hypothesis testing is a tool for making statistical inferences about the population data. It is an analysis tool that tests assumptions and determines how likely something is within a given standard of accuracy. Hypothesis testing provides a way to verify whether the results of an experiment are valid.

A null hypothesis and an alternative hypothesis are set up before performing the hypothesis testing. This helps to arrive at a conclusion regarding the sample obtained from the population. In this article, we will learn more about hypothesis testing, its types, steps to perform the testing, and associated examples.

What is Hypothesis Testing in Statistics?

Hypothesis testing uses sample data from the population to draw useful conclusions regarding the population probability distribution . It tests an assumption made about the data using different types of hypothesis testing methodologies. The hypothesis testing results in either rejecting or not rejecting the null hypothesis.

Hypothesis Testing Definition

Hypothesis testing can be defined as a statistical tool that is used to identify if the results of an experiment are meaningful or not. It involves setting up a null hypothesis and an alternative hypothesis. These two hypotheses will always be mutually exclusive. This means that if the null hypothesis is true then the alternative hypothesis is false and vice versa. An example of hypothesis testing is setting up a test to check if a new medicine works on a disease in a more efficient manner.

Null Hypothesis

The null hypothesis is a concise mathematical statement that is used to indicate that there is no difference between two possibilities. In other words, there is no difference between certain characteristics of data. This hypothesis assumes that the outcomes of an experiment are based on chance alone. It is denoted as \(H_{0}\). Hypothesis testing is used to conclude if the null hypothesis can be rejected or not. Suppose an experiment is conducted to check if girls are shorter than boys at the age of 5. The null hypothesis will say that they are the same height.

Alternative Hypothesis

The alternative hypothesis is an alternative to the null hypothesis. It is used to show that the observations of an experiment are due to some real effect. It indicates that there is a statistical significance between two possible outcomes and can be denoted as \(H_{1}\) or \(H_{a}\). For the above-mentioned example, the alternative hypothesis would be that girls are shorter than boys at the age of 5.

Hypothesis Testing P Value

In hypothesis testing, the p value is used to indicate whether the results obtained after conducting a test are statistically significant or not. It also indicates the probability of making an error in rejecting or not rejecting the null hypothesis.This value is always a number between 0 and 1. The p value is compared to an alpha level, \(\alpha\) or significance level. The alpha level can be defined as the acceptable risk of incorrectly rejecting the null hypothesis. The alpha level is usually chosen between 1% to 5%.

Hypothesis Testing Critical region

All sets of values that lead to rejecting the null hypothesis lie in the critical region. Furthermore, the value that separates the critical region from the non-critical region is known as the critical value.

Hypothesis Testing Formula

Depending upon the type of data available and the size, different types of hypothesis testing are used to determine whether the null hypothesis can be rejected or not. The hypothesis testing formula for some important test statistics are given below:

• z = \(\frac{\overline{x}-\mu}{\frac{\sigma}{\sqrt{n}}}\). \(\overline{x}\) is the sample mean, \(\mu\) is the population mean, \(\sigma\) is the population standard deviation and n is the size of the sample.
• t = \(\frac{\overline{x}-\mu}{\frac{s}{\sqrt{n}}}\). s is the sample standard deviation.
• \(\chi ^{2} = \sum \frac{(O_{i}-E_{i})^{2}}{E_{i}}\). \(O_{i}\) is the observed value and \(E_{i}\) is the expected value.

We will learn more about these test statistics in the upcoming section.

Types of Hypothesis Testing

Selecting the correct test for performing hypothesis testing can be confusing. These tests are used to determine a test statistic on the basis of which the null hypothesis can either be rejected or not rejected. Some of the important tests used for hypothesis testing are given below.

Hypothesis Testing Z Test

A z test is a way of hypothesis testing that is used for a large sample size (n ≥ 30). It is used to determine whether there is a difference between the population mean and the sample mean when the population standard deviation is known. It can also be used to compare the mean of two samples. It is used to compute the z test statistic. The formulas are given as follows:

• One sample: z = \(\frac{\overline{x}-\mu}{\frac{\sigma}{\sqrt{n}}}\).
• Two samples: z = \(\frac{(\overline{x_{1}}-\overline{x_{2}})-(\mu_{1}-\mu_{2})}{\sqrt{\frac{\sigma_{1}^{2}}{n_{1}}+\frac{\sigma_{2}^{2}}{n_{2}}}}\).

Hypothesis Testing t Test

The t test is another method of hypothesis testing that is used for a small sample size (n < 30). It is also used to compare the sample mean and population mean. However, the population standard deviation is not known. Instead, the sample standard deviation is known. The mean of two samples can also be compared using the t test.

• One sample: t = \(\frac{\overline{x}-\mu}{\frac{s}{\sqrt{n}}}\).
• Two samples: t = \(\frac{(\overline{x_{1}}-\overline{x_{2}})-(\mu_{1}-\mu_{2})}{\sqrt{\frac{s_{1}^{2}}{n_{1}}+\frac{s_{2}^{2}}{n_{2}}}}\).

Hypothesis Testing Chi Square

The Chi square test is a hypothesis testing method that is used to check whether the variables in a population are independent or not. It is used when the test statistic is chi-squared distributed.

One Tailed Hypothesis Testing

One tailed hypothesis testing is done when the rejection region is only in one direction. It can also be known as directional hypothesis testing because the effects can be tested in one direction only. This type of testing is further classified into the right tailed test and left tailed test.

Right Tailed Hypothesis Testing

The right tail test is also known as the upper tail test. This test is used to check whether the population parameter is greater than some value. The null and alternative hypotheses for this test are given as follows:

\(H_{0}\): The population parameter is ≤ some value

\(H_{1}\): The population parameter is > some value.

If the test statistic has a greater value than the critical value then the null hypothesis is rejected

Left Tailed Hypothesis Testing

The left tail test is also known as the lower tail test. It is used to check whether the population parameter is less than some value. The hypotheses for this hypothesis testing can be written as follows:

\(H_{0}\): The population parameter is ≥ some value

\(H_{1}\): The population parameter is < some value.

The null hypothesis is rejected if the test statistic has a value lesser than the critical value.

Two Tailed Hypothesis Testing

In this hypothesis testing method, the critical region lies on both sides of the sampling distribution. It is also known as a non - directional hypothesis testing method. The two-tailed test is used when it needs to be determined if the population parameter is assumed to be different than some value. The hypotheses can be set up as follows:

\(H_{0}\): the population parameter = some value

\(H_{1}\): the population parameter ≠ some value

The null hypothesis is rejected if the test statistic has a value that is not equal to the critical value.

Hypothesis Testing Steps

Hypothesis testing can be easily performed in five simple steps. The most important step is to correctly set up the hypotheses and identify the right method for hypothesis testing. The basic steps to perform hypothesis testing are as follows:

• Step 1: Set up the null hypothesis by correctly identifying whether it is the left-tailed, right-tailed, or two-tailed hypothesis testing.
• Step 2: Set up the alternative hypothesis.
• Step 3: Choose the correct significance level, \(\alpha\), and find the critical value.
• Step 4: Calculate the correct test statistic (z, t or \(\chi\)) and p-value.
• Step 5: Compare the test statistic with the critical value or compare the p-value with \(\alpha\) to arrive at a conclusion. In other words, decide if the null hypothesis is to be rejected or not.

Hypothesis Testing Example

The best way to solve a problem on hypothesis testing is by applying the 5 steps mentioned in the previous section. Suppose a researcher claims that the mean average weight of men is greater than 100kgs with a standard deviation of 15kgs. 30 men are chosen with an average weight of 112.5 Kgs. Using hypothesis testing, check if there is enough evidence to support the researcher's claim. The confidence interval is given as 95%.

Step 1: This is an example of a right-tailed test. Set up the null hypothesis as \(H_{0}\): \(\mu\) = 100.

Step 2: The alternative hypothesis is given by \(H_{1}\): \(\mu\) > 100.

Step 3: As this is a one-tailed test, \(\alpha\) = 100% - 95% = 5%. This can be used to determine the critical value.

1 - \(\alpha\) = 1 - 0.05 = 0.95

0.95 gives the required area under the curve. Now using a normal distribution table, the area 0.95 is at z = 1.645. A similar process can be followed for a t-test. The only additional requirement is to calculate the degrees of freedom given by n - 1.

Step 4: Calculate the z test statistic. This is because the sample size is 30. Furthermore, the sample and population means are known along with the standard deviation.

z = \(\frac{\overline{x}-\mu}{\frac{\sigma}{\sqrt{n}}}\).

\(\mu\) = 100, \(\overline{x}\) = 112.5, n = 30, \(\sigma\) = 15

z = \(\frac{112.5-100}{\frac{15}{\sqrt{30}}}\) = 4.56

Step 5: Conclusion. As 4.56 > 1.645 thus, the null hypothesis can be rejected.

Hypothesis Testing and Confidence Intervals

Confidence intervals form an important part of hypothesis testing. This is because the alpha level can be determined from a given confidence interval. Suppose a confidence interval is given as 95%. Subtract the confidence interval from 100%. This gives 100 - 95 = 5% or 0.05. This is the alpha value of a one-tailed hypothesis testing. To obtain the alpha value for a two-tailed hypothesis testing, divide this value by 2. This gives 0.05 / 2 = 0.025.

Related Articles:

• Probability and Statistics
• Data Handling

Important Notes on Hypothesis Testing

• Hypothesis testing is a technique that is used to verify whether the results of an experiment are statistically significant.
• It involves the setting up of a null hypothesis and an alternate hypothesis.
• There are three types of tests that can be conducted under hypothesis testing - z test, t test, and chi square test.
• Hypothesis testing can be classified as right tail, left tail, and two tail tests.

Examples on Hypothesis Testing

• Example 1: The average weight of a dumbbell in a gym is 90lbs. However, a physical trainer believes that the average weight might be higher. A random sample of 5 dumbbells with an average weight of 110lbs and a standard deviation of 18lbs. Using hypothesis testing check if the physical trainer's claim can be supported for a 95% confidence level. Solution: As the sample size is lesser than 30, the t-test is used. \(H_{0}\): \(\mu\) = 90, \(H_{1}\): \(\mu\) > 90 \(\overline{x}\) = 110, \(\mu\) = 90, n = 5, s = 18. \(\alpha\) = 0.05 Using the t-distribution table, the critical value is 2.132 t = \(\frac{\overline{x}-\mu}{\frac{s}{\sqrt{n}}}\) t = 2.484 As 2.484 > 2.132, the null hypothesis is rejected. Answer: The average weight of the dumbbells may be greater than 90lbs
• Example 2: The average score on a test is 80 with a standard deviation of 10. With a new teaching curriculum introduced it is believed that this score will change. On random testing, the score of 38 students, the mean was found to be 88. With a 0.05 significance level, is there any evidence to support this claim? Solution: This is an example of two-tail hypothesis testing. The z test will be used. \(H_{0}\): \(\mu\) = 80, \(H_{1}\): \(\mu\) ≠ 80 \(\overline{x}\) = 88, \(\mu\) = 80, n = 36, \(\sigma\) = 10. \(\alpha\) = 0.05 / 2 = 0.025 The critical value using the normal distribution table is 1.96 z = \(\frac{\overline{x}-\mu}{\frac{\sigma}{\sqrt{n}}}\) z = \(\frac{88-80}{\frac{10}{\sqrt{36}}}\) = 4.8 As 4.8 > 1.96, the null hypothesis is rejected. Answer: There is a difference in the scores after the new curriculum was introduced.
• Example 3: The average score of a class is 90. However, a teacher believes that the average score might be lower. The scores of 6 students were randomly measured. The mean was 82 with a standard deviation of 18. With a 0.05 significance level use hypothesis testing to check if this claim is true. Solution: The t test will be used. \(H_{0}\): \(\mu\) = 90, \(H_{1}\): \(\mu\) < 90 \(\overline{x}\) = 110, \(\mu\) = 90, n = 6, s = 18 The critical value from the t table is -2.015 t = \(\frac{\overline{x}-\mu}{\frac{s}{\sqrt{n}}}\) t = \(\frac{82-90}{\frac{18}{\sqrt{6}}}\) t = -1.088 As -1.088 > -2.015, we fail to reject the null hypothesis. Answer: There is not enough evidence to support the claim.

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FAQs on Hypothesis Testing

What is hypothesis testing.

Hypothesis testing in statistics is a tool that is used to make inferences about the population data. It is also used to check if the results of an experiment are valid.

What is the z Test in Hypothesis Testing?

The z test in hypothesis testing is used to find the z test statistic for normally distributed data . The z test is used when the standard deviation of the population is known and the sample size is greater than or equal to 30.

What is the t Test in Hypothesis Testing?

The t test in hypothesis testing is used when the data follows a student t distribution . It is used when the sample size is less than 30 and standard deviation of the population is not known.

What is the formula for z test in Hypothesis Testing?

The formula for a one sample z test in hypothesis testing is z = \(\frac{\overline{x}-\mu}{\frac{\sigma}{\sqrt{n}}}\) and for two samples is z = \(\frac{(\overline{x_{1}}-\overline{x_{2}})-(\mu_{1}-\mu_{2})}{\sqrt{\frac{\sigma_{1}^{2}}{n_{1}}+\frac{\sigma_{2}^{2}}{n_{2}}}}\).

What is the p Value in Hypothesis Testing?

The p value helps to determine if the test results are statistically significant or not. In hypothesis testing, the null hypothesis can either be rejected or not rejected based on the comparison between the p value and the alpha level.

What is One Tail Hypothesis Testing?

When the rejection region is only on one side of the distribution curve then it is known as one tail hypothesis testing. The right tail test and the left tail test are two types of directional hypothesis testing.

What is the Alpha Level in Two Tail Hypothesis Testing?

To get the alpha level in a two tail hypothesis testing divide \(\alpha\) by 2. This is done as there are two rejection regions in the curve.

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Lesson 10 of 24 By Avijeet Biswal

Table of Contents

In today’s data-driven world, decisions are based on data all the time. Hypothesis plays a crucial role in that process, whether it may be making business decisions, in the health sector, academia, or in quality improvement. Without hypothesis and hypothesis tests, you risk drawing the wrong conclusions and making bad decisions. In this tutorial, you will look at Hypothesis Testing in Statistics.

What Is Hypothesis Testing in Statistics?

Hypothesis Testing is a type of statistical analysis in which you put your assumptions about a population parameter to the test. It is used to estimate the relationship between 2 statistical variables.

Let's discuss few examples of statistical hypothesis from real-life - 

• A teacher assumes that 60% of his college's students come from lower-middle-class families.
• A doctor believes that 3D (Diet, Dose, and Discipline) is 90% effective for diabetic patients.

Now that you know about hypothesis testing, look at the two types of hypothesis testing in statistics.

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Importance of Hypothesis Testing in Data Analysis

Here is what makes hypothesis testing so important in data analysis and why it is key to making better decisions:

Avoiding Misleading Conclusions (Type I and Type II Errors)

One of the biggest benefits of hypothesis testing is that it helps you avoid jumping to the wrong conclusions. For instance, a Type I error could occur if a company launches a new product thinking it will be a hit, only to find out later that the data misled them. A Type II error might happen when a company overlooks a potentially successful product because their testing wasn’t thorough enough. By setting up the right significance level and carefully calculating the p-value, hypothesis testing minimizes the chances of these errors, leading to more accurate results.

Making Smarter Choices

Hypothesis testing is key to making smarter, evidence-based decisions. Let’s say a city planner wants to determine if building a new park will increase community engagement. By testing the hypothesis using data from similar projects, they can make an informed choice. Similarly, a teacher might use hypothesis testing to see if a new teaching method actually improves student performance. It’s about taking the guesswork out of decisions and relying on solid evidence instead.

Optimizing Business Tactics

In business, hypothesis testing is invaluable for testing new ideas and strategies before fully committing to them. For example, an e-commerce company might want to test whether offering free shipping increases sales. By using hypothesis testing, they can compare sales data from customers who received free shipping offers and those who didn’t. This allows them to base their business decisions on data, not hunches, reducing the risk of costly mistakes.

Hypothesis Testing Formula

Z = ( x̅ – μ0 ) / (σ /√n)

• Here, x̅ is the sample mean,
• μ0 is the population mean,
• σ is the standard deviation,
• n is the sample size.

How Hypothesis Testing Works?

An analyst performs hypothesis testing on a statistical sample to present evidence of the plausibility of the null hypothesis. Measurements and analyses are conducted on a random sample of the population to test a theory. Analysts use a random population sample to test two hypotheses: the null and alternative hypotheses.

The null hypothesis is typically an equality hypothesis between population parameters; for example, a null hypothesis may claim that the population means return equals zero. The alternate hypothesis is essentially the inverse of the null hypothesis (e.g., the population means the return is not equal to zero). As a result, they are mutually exclusive, and only one can be correct. One of the two possibilities, however, will always be correct.

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Null Hypothesis and Alternative Hypothesis

The Null Hypothesis is the assumption that the event will not occur. A null hypothesis has no bearing on the study's outcome unless it is rejected.

H0 is the symbol for it, and it is pronounced H-naught.

The Alternate Hypothesis is the logical opposite of the null hypothesis. The acceptance of the alternative hypothesis follows the rejection of the null hypothesis. H1 is the symbol for it.

Let's understand this with an example.

A sanitizer manufacturer claims that its product kills 95 percent of germs on average. 

To put this company's claim to the test, create a null and alternate hypothesis.

H0 (Null Hypothesis): Average = 95%.

Alternative Hypothesis (H1): The average is less than 95%.

Another straightforward example to understand this concept is determining whether or not a coin is fair and balanced. The null hypothesis states that the probability of a show of heads is equal to the likelihood of a show of tails. In contrast, the alternate theory states that the probability of a show of heads and tails would be very different.

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Hypothesis Testing Calculation With Examples

Let's consider a hypothesis test for the average height of women in the United States. Suppose our null hypothesis is that the average height is 5'4". We gather a sample of 100 women and determine their average height is 5'5". The standard deviation of population is 2.

To calculate the z-score, we would use the following formula:

z = ( x̅ – μ0 ) / (σ /√n)

z = (5'5" - 5'4") / (2" / √100)

z = 0.5 / (0.045)

We will reject the null hypothesis as the z-score of 11.11 is very large and conclude that there is evidence to suggest that the average height of women in the US is greater than 5'4".

Steps in Hypothesis Testing

Hypothesis testing is a statistical method to determine if there is enough evidence in a sample of data to infer that a certain condition is true for the entire population. Here’s a breakdown of the typical steps involved in hypothesis testing:

Formulate Hypotheses

• Null Hypothesis (H0): This hypothesis states that there is no effect or difference, and it is the hypothesis you attempt to reject with your test.
• Alternative Hypothesis (H1 or Ha): This hypothesis is what you might believe to be true or hope to prove true. It is usually considered the opposite of the null hypothesis.

Choose the Significance Level (α)

The significance level, often denoted by alpha (α), is the probability of rejecting the null hypothesis when it is true. Common choices for α are 0.05 (5%), 0.01 (1%), and 0.10 (10%).

Select the Appropriate Test

Choose a statistical test based on the type of data and the hypothesis. Common tests include t-tests, chi-square tests, ANOVA, and regression analysis. The selection depends on data type, distribution, sample size, and whether the hypothesis is one-tailed or two-tailed.

Collect Data

Gather the data that will be analyzed in the test. To infer conclusions accurately, this data should be representative of the population.

Calculate the Test Statistic

Based on the collected data and the chosen test, calculate a test statistic that reflects how much the observed data deviates from the null hypothesis.

Determine the p-value

The p-value is the probability of observing test results at least as extreme as the results observed, assuming the null hypothesis is correct. It helps determine the strength of the evidence against the null hypothesis.

Make a Decision

Compare the p-value to the chosen significance level:

• If the p-value ≤ α: Reject the null hypothesis, suggesting sufficient evidence in the data supports the alternative hypothesis.
• If the p-value > α: Do not reject the null hypothesis, suggesting insufficient evidence to support the alternative hypothesis.

Report the Results

Present the findings from the hypothesis test, including the test statistic, p-value, and the conclusion about the hypotheses.

Perform Post-hoc Analysis (if necessary)

Depending on the results and the study design, further analysis may be needed to explore the data more deeply or to address multiple comparisons if several hypotheses were tested simultaneously.

Types of Hypothesis Testing

To determine whether a discovery or relationship is statistically significant, hypothesis testing uses a z-test. It usually checks to see if two means are the same (the null hypothesis). Only when the population standard deviation is known and the sample size is 30 data points or more, can a z-test be applied.

A statistical test called a t-test is employed to compare the means of two groups. To determine whether two groups differ or if a procedure or treatment affects the population of interest, it is frequently used in hypothesis testing.

3. Chi-Square 

You utilize a Chi-square test for hypothesis testing concerning whether your data is as predicted. To determine if the expected and observed results are well-fitted, the Chi-square test analyzes the differences between categorical variables from a random sample. The test's fundamental premise is that the observed values in your data should be compared to the predicted values that would be present if the null hypothesis were true.

ANOVA , or Analysis of Variance, is a statistical method used to compare the means of three or more groups. It’s particularly useful when you want to see if there are significant differences between multiple groups. For instance, in business, a company might use ANOVA to analyze whether three different stores are performing differently in terms of sales. It’s also widely used in fields like medical research and social sciences, where comparing group differences can provide valuable insights.

Hypothesis Testing and Confidence Intervals

Both confidence intervals and hypothesis tests are inferential techniques that depend on approximating the sample distribution. Data from a sample is used to estimate a population parameter using confidence intervals. Data from a sample is used in hypothesis testing to examine a given hypothesis. We must have a postulated parameter to conduct hypothesis testing.

Bootstrap distributions and randomization distributions are created using comparable simulation techniques. The observed sample statistic is the focal point of a bootstrap distribution, whereas the null hypothesis value is the focal point of a randomization distribution.

A variety of feasible population parameter estimates are included in confidence ranges. In this lesson, we created just two-tailed confidence intervals. There is a direct connection between these two-tail confidence intervals and these two-tail hypothesis tests. The results of a two-tailed hypothesis test and two-tailed confidence intervals typically provide the same results. In other words, a hypothesis test at the 0.05 level will virtually always fail to reject the null hypothesis if the 95% confidence interval contains the predicted value. A hypothesis test at the 0.05 level will nearly certainly reject the null hypothesis if the 95% confidence interval does not include the hypothesized parameter.

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Simple and Composite Hypothesis Testing

Depending on the population distribution, you can classify the statistical hypothesis into two types.

Simple Hypothesis: A simple hypothesis specifies an exact value for the parameter.

Composite Hypothesis: A composite hypothesis specifies a range of values.

A company is claiming that their average sales for this quarter are 1000 units. This is an example of a simple hypothesis.

Suppose the company claims that the sales are in the range of 900 to 1000 units. Then this is a case of a composite hypothesis.

One-Tailed and Two-Tailed Hypothesis Testing

The One-Tailed test, also called a directional test, considers a critical region of data that would result in the null hypothesis being rejected if the test sample falls into it, inevitably meaning the acceptance of the alternate hypothesis.

In a one-tailed test, the critical distribution area is one-sided, meaning the test sample is either greater or lesser than a specific value.

In two tails, the test sample is checked to be greater or less than a range of values in a Two-Tailed test, implying that the critical distribution area is two-sided.

If the sample falls within this range, the alternate hypothesis will be accepted, and the null hypothesis will be rejected.

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Right Tailed Hypothesis Testing

If the larger than (>) sign appears in your hypothesis statement, you are using a right-tailed test, also known as an upper test. Or, to put it another way, the disparity is to the right. For instance, you can contrast the battery life before and after a change in production. Your hypothesis statements can be the following if you want to know if the battery life is longer than the original (let's say 90 hours):

• The null hypothesis is (H0 <= 90) or less change.
• A possibility is that battery life has risen (H1) > 90.

The crucial point in this situation is that the alternate hypothesis (H1), not the null hypothesis, decides whether you get a right-tailed test.

Left Tailed Hypothesis Testing

Alternative hypotheses that assert the true value of a parameter is lower than the null hypothesis are tested with a left-tailed test; they are indicated by the asterisk "<".

Suppose H0: mean = 50 and H1: mean not equal to 50

According to the H1, the mean can be greater than or less than 50. This is an example of a Two-tailed test.

In a similar manner, if H0: mean >=50, then H1: mean <50

Here the mean is less than 50. It is called a One-tailed test.

Type 1 and Type 2 Error

A hypothesis test can result in two types of errors.

Type 1 Error: A Type-I error occurs when sample results reject the null hypothesis despite being true.

Type 2 Error: A Type-II error occurs when the null hypothesis is not rejected when it is false, unlike a Type-I error.

Suppose a teacher evaluates the examination paper to decide whether a student passes or fails.

H0: Student has passed

H1: Student has failed

Type I error will be the teacher failing the student [rejects H0] although the student scored the passing marks [H0 was true]. 

Type II error will be the case where the teacher passes the student [do not reject H0] although the student did not score the passing marks [H1 is true].

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Practice Problems on Hypothesis Testing

Here are the practice problems on hypothesis testing that will help you understand how to apply these concepts in real-world scenarios:

A telecom service provider claims that customers spend an average of ₹400 per month, with a standard deviation of ₹25. However, a random sample of 50 customer bills shows a mean of ₹250 and a standard deviation of ₹15. Does this sample data support the service provider’s claim?

Solution: Let’s break this down:

• Null Hypothesis (H0): The average amount spent per month is ₹400.
• Alternate Hypothesis (H1): The average amount spent per month is not ₹400.
• Population Standard Deviation (σ): ₹25
• Sample Size (n): 50
• Sample Mean (x̄): ₹250

1. Calculate the z-value:

z=250-40025/50 −42.42

2. Compare with critical z-values: For a 5% significance level, critical z-values are -1.96 and +1.96. Since -42.42 is far outside this range, we reject the null hypothesis. The sample data suggests that the average amount spent is significantly different from ₹400.

Out of 850 customers, 400 made online grocery purchases. Can we conclude that more than 50% of customers are moving towards online grocery shopping?

Solution: Here’s how to approach it:

• Proportion of customers who shopped online (p): 400 / 850 = 0.47
• Null Hypothesis (H0): The proportion of online shoppers is 50% or more.
• Alternate Hypothesis (H1): The proportion of online shoppers is less than 50%.
• Sample Size (n): 850
• Significance Level (α): 5%

z=p-PP(1-P)/n

z=0.47-0.500.50.5/850  −1.74

2. Compare with the critical z-value: For a 5% significance level (one-tailed test), the critical z-value is -1.645. Since -1.74 is less than -1.645, we reject the null hypothesis. This means the data does not support the idea that most customers are moving towards online grocery shopping.

In a study of code quality, Team A has 250 errors in 1000 lines of code, and Team B has 300 errors in 800 lines of code. Can we say Team B performs worse than Team A?

Solution: Let’s analyze it:

• Proportion of errors for Team A (pA): 250 / 1000 = 0.25
• Proportion of errors for Team B (pB): 300 / 800 = 0.375
• Null Hypothesis (H0): Team B’s error rate is less than or equal to Team A’s.
• Alternate Hypothesis (H1): Team B’s error rate is greater than Team A’s.
• Sample Size for Team A (nA): 1000
• Sample Size for Team B (nB): 800

p=nApA+nBpBnA+nB

p=10000.25+8000.3751000+800 ≈ 0.305

z=​pA−pB​p(1-p)(1nA+1nB)

z=​0.25−0.375​0.305(1-0.305) (11000+1800) ≈ −5.72

2. Compare with the critical z-value: For a 5% significance level (one-tailed test), the critical z-value is +1.645. Since -5.72 is far less than +1.645, we reject the null hypothesis. The data indicates that Team B’s performance is significantly worse than Team A’s.

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Applications of Hypothesis Testing

Apart from the practical problems, let's look at the real-world applications of hypothesis testing across various fields:

Medicine and Healthcare

In medicine, hypothesis testing plays a pivotal role in assessing the success of new treatments. For example, researchers may want to find out if a new exercise regimen improves heart health. By comparing data from patients who followed the program to those who didn’t, they can determine if the exercise significantly improves health outcomes. Such rigorous testing allows medical professionals to rely on proven methods rather than assumptions.

Quality Control and Manufacturing

In manufacturing, ensuring product quality is vital, and hypothesis testing helps maintain those standards. Suppose a beverage company introduces a new bottling process and wants to verify if it reduces contamination. By analyzing samples from the new and old processes, hypothesis testing can reveal whether the new method reduces the risk of contamination. This allows manufacturers to implement improvements that enhance product safety and quality confidently.

Education and Learning

In education and learning, hypothesis testing is a tool to evaluate the impact of innovative teaching techniques. Imagine a situation where teachers introduce project-based learning to boost critical thinking skills. By comparing the performance of students who engaged in project-based learning with those in traditional settings, educators can test their hypothesis. The results can help educators make informed choices about adopting new teaching strategies.

Environmental Science

Hypothesis testing is essential in environmental science for evaluating the effectiveness of conservation measures. For example, scientists might explore whether a new water management strategy improves river health. By collecting and comparing data on water quality before and after the implementation of the strategy, they can determine whether the intervention leads to positive changes. Such findings are crucial for guiding environmental decisions that have long-term impacts.

Marketing and Advertising

In marketing, businesses use hypothesis testing to refine their approaches. For instance, a clothing brand might test if offering limited-time discounts increases customer loyalty. By running campaigns with and without the discount and analyzing the outcomes, they can assess if the strategy boosts customer retention. Data-driven insights from hypothesis testing enable companies to design marketing strategies that resonate with their audience and drive growth.

Limitations of Hypothesis Testing

Hypothesis testing has some limitations that researchers should be aware of:

• It cannot prove or establish the truth: Hypothesis testing provides evidence to support or reject a hypothesis, but it cannot confirm the absolute truth of the research question.
• Results are sample-specific: Hypothesis testing is based on analyzing a sample from a population, and the conclusions drawn are specific to that particular sample.
• Possible errors: During hypothesis testing, there is a chance of committing type I error (rejecting a true null hypothesis) or type II error (failing to reject a false null hypothesis).
• Assumptions and requirements: Different tests have specific assumptions and requirements that must be met to accurately interpret results.

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After reading this tutorial, you would have a much better understanding of hypothesis testing, one of the most important concepts in the field of Data Science . The majority of hypotheses are based on speculation about observed behavior, natural phenomena, or established theories.

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1. What is hypothesis testing in statistics with example?

Hypothesis testing is a statistical method used to determine if there is enough evidence in a sample data to draw conclusions about a population. It involves formulating two competing hypotheses, the null hypothesis (H0) and the alternative hypothesis (Ha), and then collecting data to assess the evidence. An example: testing if a new drug improves patient recovery (Ha) compared to the standard treatment (H0) based on collected patient data.

2. What is H0 and H1 in statistics?

In statistics, H0​ and H1​ represent the null and alternative hypotheses. The null hypothesis, H0​, is the default assumption that no effect or difference exists between groups or conditions. The alternative hypothesis, H1​, is the competing claim suggesting an effect or a difference. Statistical tests determine whether to reject the null hypothesis in favor of the alternative hypothesis based on the data.

3. What is a simple hypothesis with an example?

A simple hypothesis is a specific statement predicting a single relationship between two variables. It posits a direct and uncomplicated outcome. For example, a simple hypothesis might state, "Increased sunlight exposure increases the growth rate of sunflowers." Here, the hypothesis suggests a direct relationship between the amount of sunlight (independent variable) and the growth rate of sunflowers (dependent variable), with no additional variables considered.

4. What are the 3 major types of hypothesis?

The three major types of hypotheses are:

• Null Hypothesis (H0): Represents the default assumption, stating that there is no significant effect or relationship in the data.
• Alternative Hypothesis (Ha): Contradicts the null hypothesis and proposes a specific effect or relationship that researchers want to investigate.
• Nondirectional Hypothesis: An alternative hypothesis that doesn't specify the direction of the effect, leaving it open for both positive and negative possibilities.

5. What software tools can assist with hypothesis testing?

Several software tools offering distinct features can help with hypothesis testing. R and RStudio are popular for their advanced statistical capabilities. The Python ecosystem, including libraries like SciPy and Statsmodels, also supports hypothesis testing. SAS and SPSS are well-established tools for comprehensive statistical analysis. For basic testing, Excel offers simple built-in functions.

6. How do I interpret the results of a hypothesis test?

Interpreting hypothesis test results involves comparing the p-value to the significance level (alpha). If the p-value is less than or equal to alpha, you can reject the null hypothesis, indicating statistical significance. This suggests that the observed effect is unlikely to have occurred by chance, validating your analysis findings.

7. Why is sample size important in hypothesis testing?

Sample size is crucial in hypothesis testing as it affects the test’s power. A larger sample size increases the likelihood of detecting a true effect, reducing the risk of Type II errors. Conversely, a small sample may lack the statistical power needed to identify differences, potentially leading to inaccurate conclusions.

8. Can hypothesis testing be used for non-numerical data?

Yes, hypothesis testing can be applied to non-numerical data through non-parametric tests. These tests are ideal when data doesn't meet parametric assumptions or when dealing with categorical data. Non-parametric tests, like the Chi-square or Mann-Whitney U test, provide robust methods for analyzing non-numerical data and drawing meaningful conclusions.

9. How do I choose the proper hypothesis test?

Selecting the right hypothesis test depends on several factors: the objective of your analysis, the type of data (numerical or categorical), and the sample size. Consider whether you're comparing means, proportions, or associations, and whether your data follows a normal distribution. The correct choice ensures accurate results tailored to your research question.

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About the Author

Avijeet is a Senior Research Analyst at Simplilearn. Passionate about Data Analytics, Machine Learning, and Deep Learning, Avijeet is also interested in politics, cricket, and football.

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Chapter 3: Hypothesis Testing

The previous two chapters introduced methods for organizing and summarizing sample data, and using sample statistics to estimate population parameters. This chapter introduces the next major topic of inferential statistics: hypothesis testing.

A hypothesis is a statement or claim about a property of a population.

The Fundamentals of Hypothesis Testing

When conducting scientific research, typically there is some known information, perhaps from some past work or from a long accepted idea. We want to test whether this claim is believable. This is the basic idea behind a hypothesis test:

• State what we think is true.
• Quantify how confident we are about our claim.
• Use sample statistics to make inferences about population parameters.

For example, past research tells us that the average life span for a hummingbird is about four years. You have been studying the hummingbirds in the southeastern United States and find a sample mean lifespan of 4.8 years. Should you reject the known or accepted information in favor of your results? How confident are you in your estimate? At what point would you say that there is enough evidence to reject the known information and support your alternative claim? How far from the known mean of four years can the sample mean be before we reject the idea that the average lifespan of a hummingbird is four years?

Hypothesis testing is a procedure, based on sample evidence and probability, used to test claims regarding a characteristic of a population.

A hypothesis is a claim or statement about a characteristic of a population of interest to us. A hypothesis test is a way for us to use our sample statistics to test a specific claim.

The population mean weight is known to be 157 lb. We want to test the claim that the mean weight has increased.

Two years ago, the proportion of infected plants was 37%. We believe that a treatment has helped, and we want to test the claim that there has been a reduction in the proportion of infected plants.

Components of a Formal Hypothesis Test

The null hypothesis is a statement about the value of a population parameter, such as the population mean (µ) or the population proportion ( p ). It contains the condition of equality and is denoted as H 0 (H-naught).

H 0 : µ = 157 or H 0 : p = 0.37

The alternative hypothesis is the claim to be tested, the opposite of the null hypothesis. It contains the value of the parameter that we consider plausible and is denoted as H 1 .

H 1 : µ > 157 or H 1 : p ≠ 0.37

The test statistic is a value computed from the sample data that is used in making a decision about the rejection of the null hypothesis. The test statistic converts the sample mean ( x̄ ) or sample proportion ( p̂ ) to a Z- or t-score under the assumption that the null hypothesis is true . It is used to decide whether the difference between the sample statistic and the hypothesized claim is significant.

The p-value is the area under the curve to the left or right of the test statistic. It is compared to the level of significance ( α ).

The critical value is the value that defines the rejection zone (the test statistic values that would lead to rejection of the null hypothesis). It is defined by the level of significance.

The level of significance ( α ) is the probability that the test statistic will fall into the critical region when the null hypothesis is true. This level is set by the researcher.

The conclusion is the final decision of the hypothesis test. The conclusion must always be clearly stated, communicating the decision based on the components of the test. It is important to realize that we never prove or accept the null hypothesis. We are merely saying that the sample evidence is not strong enough to warrant the rejection of the null hypothesis. The conclusion is made up of two parts:

1) Reject or fail to reject the null hypothesis, and 2) there is or is not enough evidence to support the alternative claim.

Option 1) Reject the null hypothesis (H 0 ). This means that you have enough statistical evidence to support the alternative claim (H 1 ).

Option 2) Fail to reject the null hypothesis (H 0 ). This means that you do NOT have enough evidence to support the alternative claim (H 1 ).

Another way to think about hypothesis testing is to compare it to the US justice system. A defendant is innocent until proven guilty (Null hypothesis—innocent). The prosecuting attorney tries to prove that the defendant is guilty (Alternative hypothesis—guilty). There are two possible conclusions that the jury can reach. First, the defendant is guilty (Reject the null hypothesis). Second, the defendant is not guilty (Fail to reject the null hypothesis). This is NOT the same thing as saying the defendant is innocent! In the first case, the prosecutor had enough evidence to reject the null hypothesis (innocent) and support the alternative claim (guilty). In the second case, the prosecutor did NOT have enough evidence to reject the null hypothesis (innocent) and support the alternative claim of guilty.

The Null and Alternative Hypotheses

There are three different pairs of null and alternative hypotheses:

where c is some known value.

A Two-sided Test

This tests whether the population parameter is equal to, versus not equal to, some specific value.

H o : μ = 12 vs. H 1 : μ ≠ 12

The critical region is divided equally into the two tails and the critical values are ± values that define the rejection zones.

A forester studying diameter growth of red pine believes that the mean diameter growth will be different if a fertilization treatment is applied to the stand.

• H o : μ = 1.2 in./ year
• H 1 : μ ≠ 1.2 in./ year

This is a two-sided question, as the forester doesn’t state whether population mean diameter growth will increase or decrease.

A Right-sided Test

This tests whether the population parameter is equal to, versus greater than, some specific value.

H o : μ = 12 vs. H 1 : μ > 12

The critical region is in the right tail and the critical value is a positive value that defines the rejection zone.

A biologist believes that there has been an increase in the mean number of lakes infected with milfoil, an invasive species, since the last study five years ago.

• H o : μ = 15 lakes
• H 1 : μ >15 lakes

This is a right-sided question, as the biologist believes that there has been an increase in population mean number of infected lakes.

A Left-sided Test

This tests whether the population parameter is equal to, versus less than, some specific value.

H o : μ = 12 vs. H 1 : μ < 12

The critical region is in the left tail and the critical value is a negative value that defines the rejection zone.

A scientist’s research indicates that there has been a change in the proportion of people who support certain environmental policies. He wants to test the claim that there has been a reduction in the proportion of people who support these policies.

• H o : p = 0.57
• H 1 : p < 0.57

This is a left-sided question, as the scientist believes that there has been a reduction in the true population proportion.

Statistically Significant

When the observed results (the sample statistics) are unlikely (a low probability) under the assumption that the null hypothesis is true, we say that the result is statistically significant, and we reject the null hypothesis. This result depends on the level of significance, the sample statistic, sample size, and whether it is a one- or two-sided alternative hypothesis.

Types of Errors

When testing, we arrive at a conclusion of rejecting the null hypothesis or failing to reject the null hypothesis. Such conclusions are sometimes correct and sometimes incorrect (even when we have followed all the correct procedures). We use incomplete sample data to reach a conclusion and there is always the possibility of reaching the wrong conclusion. There are four possible conclusions to reach from hypothesis testing. Of the four possible outcomes, two are correct and two are NOT correct.

A Type I error is when we reject the null hypothesis when it is true. The symbol α (alpha) is used to represent Type I errors. This is the same alpha we use as the level of significance. By setting alpha as low as reasonably possible, we try to control the Type I error through the level of significance.

A Type II error is when we fail to reject the null hypothesis when it is false. The symbol β (beta) is used to represent Type II errors.

In general, Type I errors are considered more serious. One step in the hypothesis test procedure involves selecting the significance level ( α ), which is the probability of rejecting the null hypothesis when it is correct. So the researcher can select the level of significance that minimizes Type I errors. However, there is a mathematical relationship between α, β , and n (sample size).

• As α increases, β decreases
• As α decreases, β increases
• As sample size increases (n), both α and β decrease

The natural inclination is to select the smallest possible value for α, thinking to minimize the possibility of causing a Type I error. Unfortunately, this forces an increase in Type II errors. By making the rejection zone too small, you may fail to reject the null hypothesis, when, in fact, it is false. Typically, we select the best sample size and level of significance, automatically setting β .

Power of the Test

A Type II error ( β ) is the probability of failing to reject a false null hypothesis. It follows that 1- β is the probability of rejecting a false null hypothesis. This probability is identified as the power of the test, and is often used to gauge the test’s effectiveness in recognizing that a null hypothesis is false.

The probability that at a fixed level α significance test will reject H 0 , when a particular alternative value of the parameter is true is called the power of the test.

Power is also directly linked to sample size. For example, suppose the null hypothesis is that the mean fish weight is 8.7 lb. Given sample data, a level of significance of 5%, and an alternative weight of 9.2 lb., we can compute the power of the test to reject μ = 8.7 lb. If we have a small sample size, the power will be low. However, increasing the sample size will increase the power of the test. Increasing the level of significance will also increase power. A 5% test of significance will have a greater chance of rejecting the null hypothesis than a 1% test because the strength of evidence required for the rejection is less. Decreasing the standard deviation has the same effect as increasing the sample size: there is more information about μ .

Hypothesis Test about the Population Mean ( μ ) when the Population Standard Deviation ( σ ) is Known

We are going to examine two equivalent ways to perform a hypothesis test: the classical approach and the p-value approach. The classical approach is based on standard deviations. This method compares the test statistic (Z-score) to a critical value (Z-score) from the standard normal table. If the test statistic falls in the rejection zone, you reject the null hypothesis. The p-value approach is based on area under the normal curve. This method compares the area associated with the test statistic to alpha ( α ), the level of significance (which is also area under the normal curve). If the p-value is less than alpha, you would reject the null hypothesis.

As a past student poetically said: If the p-value is a wee value, Reject Ho

Both methods must have:

• Data from a random sample.
• Verification of the assumption of normality.
• A null and alternative hypothesis.
• A criterion that determines if we reject or fail to reject the null hypothesis.
• A conclusion that answers the question.

There are four steps required for a hypothesis test:

• State the null and alternative hypotheses.
• State the level of significance and the critical value.
• Compute the test statistic.
• State a conclusion.

The Classical Method for Testing a Claim about the Population Mean ( μ ) when the Population Standard Deviation ( σ ) is Known

A forester studying diameter growth of red pine believes that the mean diameter growth will be different from the known mean growth of 1.35 inches/year if a fertilization treatment is applied to the stand. He conducts his experiment, collects data from a sample of 32 plots, and gets a sample mean diameter growth of 1.6 in./year. The population standard deviation for this stand is known to be 0.46 in./year. Does he have enough evidence to support his claim?

Step 1) State the null and alternative hypotheses.

• H o : μ = 1.35 in./year
• H 1 : μ ≠ 1.35 in./year

Step 2) State the level of significance and the critical value.

• We will choose a level of significance of 5% ( α = 0.05).
• For a two-sided question, we need a two-sided critical value – Z α /2 and + Z α /2 .
• The level of significance is divided by 2 (since we are only testing “not equal”). We must have two rejection zones that can deal with either a greater than or less than outcome (to the right (+) or to the left (-)).
• We need to find the Z-score associated with the area of 0.025. The red areas are equal to α /2 = 0.05/2 = 0.025 or 2.5% of the area under the normal curve.
• Go into the body of values and find the negative Z-score associated with the area 0.025.

• The negative critical value is -1.96. Since the curve is symmetric, we know that the positive critical value is 1.96.
• ±1.96 are the critical values. These values set up the rejection zone. If the test statistic falls within these red rejection zones, we reject the null hypothesis.

Step 3) Compute the test statistic.

• The test statistic is the number of standard deviations the sample mean is from the known mean. It is also a Z-score, just like the critical value.

• For this problem, the test statistic is

Step 4) State a conclusion.

• Compare the test statistic to the critical value. If the test statistic falls into the rejection zones, reject the null hypothesis. In other words, if the test statistic is greater than +1.96 or less than -1.96, reject the null hypothesis.

In this problem, the test statistic falls in the red rejection zone. The test statistic of 3.07 is greater than the critical value of 1.96.We will reject the null hypothesis. We have enough evidence to support the claim that the mean diameter growth is different from (not equal to) 1.35 in./year.

A researcher believes that there has been an increase in the average farm size in his state since the last study five years ago. The previous study reported a mean size of 450 acres with a population standard deviation ( σ ) of 167 acres. He samples 45 farms and gets a sample mean of 485.8 acres. Is there enough information to support his claim?

• H o : μ = 450 acres
• H 1 : μ >450 acres
• For a one-sided question, we need a one-sided positive critical value Z α .
• The level of significance is all in the right side (the rejection zone is just on the right side).
• We need to find the Z-score associated with the 5% area in the right tail.

• Go into the body of values in the standard normal table and find the Z-score that separates the lower 95% from the upper 5%.
• The critical value is 1.645. This value sets up the rejection zone.

• Compare the test statistic to the critical value.

• The test statistic does not fall in the rejection zone. It is less than the critical value.

We fail to reject the null hypothesis. We do not have enough evidence to support the claim that the mean farm size has increased from 450 acres.

A researcher believes that there has been a reduction in the mean number of hours that college students spend preparing for final exams. A national study stated that students at a 4-year college spend an average of 23 hours preparing for 5 final exams each semester with a population standard deviation of 7.3 hours. The researcher sampled 227 students and found a sample mean study time of 19.6 hours. Does this indicate that the average study time for final exams has decreased? Use a 1% level of significance to test this claim.

• H o : μ = 23 hours
• H 1 : μ < 23 hours
• This is a left-sided test so alpha (0.01) is all in the left tail.

• Go into the body of values in the standard normal table and find the Z-score that defines the lower 1% of the area.
• The critical value is -2.33. This value sets up the rejection zone.

• The test statistic falls in the rejection zone. The test statistic of -7.02 is less than the critical value of -2.33.

We reject the null hypothesis. We have sufficient evidence to support the claim that the mean final exam study time has decreased below 23 hours.

Testing a Hypothesis using P-values

The p-value is the probability of observing our sample mean given that the null hypothesis is true. It is the area under the curve to the left or right of the test statistic. If the probability of observing such a sample mean is very small (less than the level of significance), we would reject the null hypothesis. Computations for the p-value depend on whether it is a one- or two-sided test.

Steps for a hypothesis test using p-values:

• State the level of significance.
• Compute the test statistic and find the area associated with it (this is the p-value).
• Compare the p-value to alpha ( α ) and state a conclusion.

Instead of comparing Z-score test statistic to Z-score critical value, as in the classical method, we compare area of the test statistic to area of the level of significance.

The Decision Rule: If the p-value is less than alpha, we reject the null hypothesis

Computing P-values

If it is a two-sided test (the alternative claim is ≠), the p-value is equal to two times the probability of the absolute value of the test statistic. If the test is a left-sided test (the alternative claim is “<”), then the p-value is equal to the area to the left of the test statistic. If the test is a right-sided test (the alternative claim is “>”), then the p-value is equal to the area to the right of the test statistic.

Let’s look at Example 6 again.

A forester studying diameter growth of red pine believes that the mean diameter growth will be different from the known mean growth of 1.35 in./year if a fertilization treatment is applied to the stand. He conducts his experiment, collects data from a sample of 32 plots, and gets a sample mean diameter growth of 1.6 in./year. The population standard deviation for this stand is known to be 0.46 in./year. Does he have enough evidence to support his claim?

Step 2) State the level of significance.

• For this problem, the test statistic is:

The p-value is two times the area of the absolute value of the test statistic (because the alternative claim is “not equal”).

• Look up the area for the Z-score 3.07 in the standard normal table. The area (probability) is equal to 1 – 0.9989 = 0.0011.
• Multiply this by 2 to get the p-value = 2 * 0.0011 = 0.0022.

Step 4) Compare the p-value to alpha and state a conclusion.

• Use the Decision Rule (if the p-value is less than α , reject H 0 ).
• In this problem, the p-value (0.0022) is less than alpha (0.05).
• We reject the H 0 . We have enough evidence to support the claim that the mean diameter growth is different from 1.35 inches/year.

Let’s look at Example 7 again.

The p-value is the area to the right of the Z-score 1.44 (the hatched area).

• This is equal to 1 – 0.9251 = 0.0749.
• The p-value is 0.0749.

• Use the Decision Rule.
• In this problem, the p-value (0.0749) is greater than alpha (0.05), so we Fail to Reject the H 0 .
• The area of the test statistic is greater than the area of alpha ( α ).

We fail to reject the null hypothesis. We do not have enough evidence to support the claim that the mean farm size has increased.

Let’s look at Example 8 again.

• H 0 : μ = 23 hours

The p-value is the area to the left of the test statistic (the little black area to the left of -7.02). The Z-score of -7.02 is not on the standard normal table. The smallest probability on the table is 0.0002. We know that the area for the Z-score -7.02 is smaller than this area (probability). Therefore, the p-value is <0.0002.

• In this problem, the p-value (p<0.0002) is less than alpha (0.01), so we Reject the H 0 .
• The area of the test statistic is much less than the area of alpha ( α ).

We reject the null hypothesis. We have enough evidence to support the claim that the mean final exam study time has decreased below 23 hours.

Both the classical method and p-value method for testing a hypothesis will arrive at the same conclusion. In the classical method, the critical Z-score is the number on the z-axis that defines the level of significance ( α ). The test statistic converts the sample mean to units of standard deviation (a Z-score). If the test statistic falls in the rejection zone defined by the critical value, we will reject the null hypothesis. In this approach, two Z-scores, which are numbers on the z-axis, are compared. In the p-value approach, the p-value is the area associated with the test statistic. In this method, we compare α (which is also area under the curve) to the p-value. If the p-value is less than α , we reject the null hypothesis. The p-value is the probability of observing such a sample mean when the null hypothesis is true. If the probability is too small (less than the level of significance), then we believe we have enough statistical evidence to reject the null hypothesis and support the alternative claim.

Software Solutions

(referring to Ex. 8)

One-Sample Z

Excel does not offer 1-sample hypothesis testing.

Hypothesis Test about the Population Mean ( μ ) when the Population Standard Deviation ( σ ) is Unknown

Frequently, the population standard deviation (σ) is not known. We can estimate the population standard deviation (σ) with the sample standard deviation (s). However, the test statistic will no longer follow the standard normal distribution. We must rely on the student’s t-distribution with n-1 degrees of freedom. Because we use the sample standard deviation (s), the test statistic will change from a Z-score to a t-score.

Steps for a hypothesis test are the same that we covered in Section 2.

Just as with the hypothesis test from the previous section, the data for this test must be from a random sample and requires either that the population from which the sample was drawn be normal or that the sample size is sufficiently large (n≥30). A t-test is robust, so small departures from normality will not adversely affect the results of the test. That being said, if the sample size is smaller than 30, it is always good to verify the assumption of normality through a normal probability plot.

We will still have the same three pairs of null and alternative hypotheses and we can still use either the classical approach or the p-value approach.

Selecting the correct critical value from the student’s t-distribution table depends on three factors: the type of test (one-sided or two-sided alternative hypothesis), the sample size, and the level of significance.

For a two-sided test (“not equal” alternative hypothesis), the critical value (t α /2 ), is determined by alpha ( α ), the level of significance, divided by two, to deal with the possibility that the result could be less than OR greater than the known value.

• If your level of significance was 0.05, you would use the 0.025 column to find the correct critical value (0.05/2 = 0.025).
• If your level of significance was 0.01, you would use the 0.005 column to find the correct critical value (0.01/2 = 0.005).

For a one-sided test (“a less than” or “greater than” alternative hypothesis), the critical value (t α ) , is determined by alpha ( α ), the level of significance, being all in the one side.

• If your level of significance was 0.05, you would use the 0.05 column to find the correct critical value for either a left or right-side question. If you are asking a “less than” (left-sided question, your critical value will be negative. If you are asking a “greater than” (right-sided question), your critical value will be positive.

Find the critical value you would use to test the claim that μ ≠ 112 with a sample size of 18 and a 5% level of significance.

In this case, the critical value (t α /2 ) would be 2.110. This is a two-sided question (≠) so you would divide alpha by 2 (0.05/2 = 0.025) and go down the 0.025 column to 17 degrees of freedom.

What would the critical value be if you wanted to test that μ < 112 for the same data?

In this case, the critical value would be 1.740. This is a one-sided question (<) so alpha would be divided by 1 (0.05/1 = 0.05). You would go down the 0.05 column with 17 degrees of freedom to get the correct critical value.

In 2005, the mean pH level of rain in a county in northern New York was 5.41. A biologist believes that the rain acidity has changed. He takes a random sample of 11 rain dates in 2010 and obtains the following data. Use a 1% level of significance to test his claim.

4.70, 5.63, 5.02, 5.78, 4.99, 5.91, 5.76, 5.54, 5.25, 5.18, 5.01

The sample size is small and we don’t know anything about the distribution of the population, so we examine a normal probability plot. The distribution looks normal so we will continue with our test.

The sample mean is 5.343 with a sample standard deviation of 0.397.

• H o : μ = 5.41
• H 1 : μ ≠ 5.41
• This is a two-sided question so alpha is divided by two.

• t α /2 is found by going down the 0.005 column with 14 degrees of freedom.
• t α /2 = ±3.169.
• The test statistic is a t-score.

• The test statistic does not fall in the rejection zone.

We will fail to reject the null hypothesis. We do not have enough evidence to support the claim that the mean rain pH has changed.

A One-sided Test

Cadmium, a heavy metal, is toxic to animals. Mushrooms, however, are able to absorb and accumulate cadmium at high concentrations. The government has set safety limits for cadmium in dry vegetables at 0.5 ppm. Biologists believe that the mean level of cadmium in mushrooms growing near strip mines is greater than the recommended limit of 0.5 ppm, negatively impacting the animals that live in this ecosystem. A random sample of 51 mushrooms gave a sample mean of 0.59 ppm with a sample standard deviation of 0.29 ppm. Use a 5% level of significance to test the claim that the mean cadmium level is greater than the acceptable limit of 0.5 ppm.

The sample size is greater than 30 so we are assured of a normal distribution of the means.

• H o : μ = 0.5 ppm
• H 1 : μ > 0.5 ppm
• This is a right-sided question so alpha is all in the right tail.

• t α is found by going down the 0.05 column with 50 degrees of freedom.
• t α = 1.676

Step 4) State a Conclusion.

The test statistic falls in the rejection zone. We will reject the null hypothesis. We have enough evidence to support the claim that the mean cadmium level is greater than the acceptable safe limit.

BUT, what happens if the significance level changes to 1%?

The critical value is now found by going down the 0.01 column with 50 degrees of freedom. The critical value is 2.403. The test statistic is now LESS THAN the critical value. The test statistic does not fall in the rejection zone. The conclusion will change. We do NOT have enough evidence to support the claim that the mean cadmium level is greater than the acceptable safe limit of 0.5 ppm.

The level of significance is the probability that you, as the researcher, set to decide if there is enough statistical evidence to support the alternative claim. It should be set before the experiment begins.

P-value Approach

We can also use the p-value approach for a hypothesis test about the mean when the population standard deviation ( σ ) is unknown. However, when using a student’s t-table, we can only estimate the range of the p-value, not a specific value as when using the standard normal table. The student’s t-table has area (probability) across the top row in the table, with t-scores in the body of the table.

• To find the p-value (the area associated with the test statistic), you would go to the row with the number of degrees of freedom.
• Go across that row until you find the two values that your test statistic is between, then go up those columns to find the estimated range for the p-value.

Estimating P-value from a Student’s T-table

If your test statistic is 3.789 with 3 degrees of freedom, you would go across the 3 df row. The value 3.789 falls between the values 3.482 and 4.541 in that row. Therefore, the p-value is between 0.02 and 0.01. The p-value will be greater than 0.01 but less than 0.02 (0.01<p<0.02).

If your level of significance is 5%, you would reject the null hypothesis as the p-value (0.01-0.02) is less than alpha ( α ) of 0.05.

If your level of significance is 1%, you would fail to reject the null hypothesis as the p-value (0.01-0.02) is greater than alpha ( α ) of 0.01.

Software packages typically output p-values. It is easy to use the Decision Rule to answer your research question by the p-value method.

(referring to Ex. 12)

One-Sample T

Test of mu = 0.5 vs. > 0.5

Additional example: www.youtube.com/watch?v=WwdSjO4VUsg .

Hypothesis Test for a Population Proportion ( p )

Frequently, the parameter we are testing is the population proportion.

• We are studying the proportion of trees with cavities for wildlife habitat.
• We need to know if the proportion of people who support green building materials has changed.
• Has the proportion of wolves that died last year in Yellowstone increased from the year before?

Recall that the best point estimate of p , the population proportion, is given by

when np (1 – p )≥10. We can use both the classical approach and the p-value approach for testing.

The steps for a hypothesis test are the same that we covered in Section 2.

The test statistic follows the standard normal distribution. Notice that the standard error (the denominator) uses p instead of p̂ , which was used when constructing a confidence interval about the population proportion. In a hypothesis test, the null hypothesis is assumed to be true, so the known proportion is used.

• The critical value comes from the standard normal table, just as in Section 2. We will still use the same three pairs of null and alternative hypotheses as we used in the previous sections, but the parameter is now p instead of μ :

• For a two-sided test, alpha will be divided by 2 giving a ± Z α /2 critical value.
• For a left-sided test, alpha will be all in the left tail giving a – Z α critical value.
• For a right-sided test, alpha will be all in the right tail giving a Z α critical value.

A botanist has produced a new variety of hybrid soy plant that is better able to withstand drought than other varieties. The botanist knows the seed germination for the parent plants is 75%, but does not know the seed germination for the new hybrid. He tests the claim that it is different from the parent plants. To test this claim, 450 seeds from the hybrid plant are tested and 321 have germinated. Use a 5% level of significance to test this claim that the germination rate is different from 75%.

• H o : p = 0.75
• H 1 : p ≠ 0.75

This is a two-sided question so alpha is divided by 2.

• Alpha is 0.05 so the critical values are ± Z α /2 = ± Z .025 .
• Look on the negative side of the standard normal table, in the body of values for 0.025.
• The critical values are ± 1.96.

The test statistic does not fall in the rejection zone. We fail to reject the null hypothesis. We do not have enough evidence to support the claim that the germination rate of the hybrid plant is different from the parent plants.

Let’s answer this question using the p-value approach. Remember, for a two-sided alternative hypothesis (“not equal”), the p-value is two times the area of the test statistic. The test statistic is -1.81 and we want to find the area to the left of -1.81 from the standard normal table.

• On the negative page, find the Z-score -1.81. Find the area associated with this Z-score.
• The area = 0.0351.
• This is a two-sided test so multiply the area times 2 to get the p-value = 0.0351 x 2 = 0.0702.

Now compare the p-value to alpha. The Decision Rule states that if the p-value is less than alpha, reject the H 0 . In this case, the p-value (0.0702) is greater than alpha (0.05) so we will fail to reject H 0 . We do not have enough evidence to support the claim that the germination rate of the hybrid plant is different from the parent plants.

You are a biologist studying the wildlife habitat in the Monongahela National Forest. Cavities in older trees provide excellent habitat for a variety of birds and small mammals. A study five years ago stated that 32% of the trees in this forest had suitable cavities for this type of wildlife. You believe that the proportion of cavity trees has increased. You sample 196 trees and find that 79 trees have cavities. Does this evidence support your claim that there has been an increase in the proportion of cavity trees?

Use a 10% level of significance to test this claim.

• H o : p = 0.32
• H 1 : p > 0.32

This is a one-sided question so alpha is divided by 1.

• Alpha is 0.10 so the critical value is Z α = Z .10
• Look on the positive side of the standard normal table, in the body of values for 0.90.
• The critical value is 1.28.

• The test statistic is the number of standard deviations the sample proportion is from the known proportion. It is also a Z-score, just like the critical value.

The test statistic is larger than the critical value (it falls in the rejection zone). We will reject the null hypothesis. We have enough evidence to support the claim that there has been an increase in the proportion of cavity trees.

Now use the p-value approach to answer the question. This is a right-sided question (“greater than”), so the p-value is equal to the area to the right of the test statistic. Go to the positive side of the standard normal table and find the area associated with the Z-score of 2.49. The area is 0.9936. Remember that this table is cumulative from the left. To find the area to the right of 2.49, we subtract from one.

p-value = (1 – 0.9936) = 0.0064

The p-value is less than the level of significance (0.10), so we reject the null hypothesis. We have enough evidence to support the claim that the proportion of cavity trees has increased.

(referring to Ex. 15)

Test and CI for One Proportion

Test of p = 0.32 vs. p > 0.32

Hypothesis Test about a Variance

When people think of statistical inference, they usually think of inferences involving population means or proportions. However, the particular population parameter needed to answer an experimenter’s practical questions varies from one situation to another, and sometimes a population’s variability is more important than its mean. Thus, product quality is often defined in terms of low variability.

Sample variance S 2 can be used for inferences concerning a population variance σ 2 . For a random sample of n measurements drawn from a normal population with mean μ and variance σ 2 , the value S 2 provides a point estimate for σ 2 . In addition, the quantity ( n – 1) S 2 / σ 2 follows a Chi-square ( χ 2 ) distribution, with df = n – 1.

The properties of Chi-square ( χ 2 ) distribution are:

• Unlike Z and t distributions, the values in a chi-square distribution are all positive.
• The chi-square distribution is asymmetric, unlike the Z and t distributions.
• There are many chi-square distributions. We obtain a particular one by specifying the degrees of freedom (df = n – 1) associated with the sample variances S 2 .

One-sample χ 2 test for testing the hypotheses:

Alternative hypothesis:

where the χ 2 critical value in the rejection region is based on degrees of freedom df = n – 1 and a specified significance level of α .

As with previous sections, if the test statistic falls in the rejection zone set by the critical value, you will reject the null hypothesis.

A forester wants to control a dense understory of striped maple that is interfering with desirable hardwood regeneration using a mist blower to apply an herbicide treatment. She wants to make sure that treatment has a consistent application rate, in other words, low variability not exceeding 0.25 gal./acre (0.06 gal. 2 ). She collects sample data (n = 11) on this type of mist blower and gets a sample variance of 0.064 gal. 2 Using a 5% level of significance, test the claim that the variance is significantly greater than 0.06 gal. 2

H 0 : σ 2 = 0.06

H 1 : σ 2 >0.06

The critical value is 18.307. Any test statistic greater than this value will cause you to reject the null hypothesis.

The test statistic is

We fail to reject the null hypothesis. The forester does NOT have enough evidence to support the claim that the variance is greater than 0.06 gal. 2 You can also estimate the p-value using the same method as for the student t-table. Go across the row for degrees of freedom until you find the two values that your test statistic falls between. In this case going across the row 10, the two table values are 4.865 and 15.987. Now go up those two columns to the top row to estimate the p-value (0.1-0.9). The p-value is greater than 0.1 and less than 0.9. Both are greater than the level of significance (0.05) causing us to fail to reject the null hypothesis.

(referring to Ex. 16)

Test and CI for One Variance

The chi-square method is only for the normal distribution.

Excel does not offer 1-sample χ 2 testing.

Putting it all Together Using the Classical Method

To test a claim about μ when σ is known.

• Write the null and alternative hypotheses.
• State the level of significance and get the critical value from the standard normal table.

• Compare the test statistic to the critical value (Z-score) and write the conclusion.

To Test a Claim about μ When σ is Unknown

• State the level of significance and get the critical value from the student’s t-table with n-1 degrees of freedom.

• Compare the test statistic to the critical value (t-score) and write the conclusion.

To Test a Claim about p

• State the level of significance and get the critical value from the standard normal distribution.

To Test a Claim about Variance

• State the level of significance and get the critical value from the chi-square table using n-1 degrees of freedom.

• Compare the test statistic to the critical value and write the conclusion.

Natural Resources Biometrics Copyright © 2014 by Diane Kiernan is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.

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What Is Hypothesis Testing?

Step 1: define the hypothesis, step 2: set the criteria, step 3: calculate the statistic, step 4: reach a conclusion, types of errors, the bottom line.

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Hypothesis Testing in Finance: Concept and Examples

Charlene Rhinehart is a CPA , CFE, chair of an Illinois CPA Society committee, and has a degree in accounting and finance from DePaul University.

Your investment advisor proposes you a monthly income investment plan that promises a variable return each month. You will invest in it only if you are assured of an average $180 monthly income. Your advisor also tells you that for the past 300 months, the scheme had investment returns with an average value of $190 and a standard deviation of $75. Should you invest in this scheme? Hypothesis testing comes to the aid for such decision-making.

Key Takeaways

• Hypothesis testing is a mathematical tool for confirming a financial or business claim or idea.
• Hypothesis testing is useful for investors trying to decide what to invest in and whether the instrument is likely to provide a satisfactory return.
• Despite the existence of different methodologies of hypothesis testing, the same four steps are used: define the hypothesis, set the criteria, calculate the statistic, and reach a conclusion.
• This mathematical model, like most statistical tools and models, has limitations and is prone to certain errors, necessitating investors also considering other models in conjunction with this one

Hypothesis or significance testing is a mathematical model for testing a claim, idea or hypothesis about a parameter of interest in a given population set, using data measured in a sample set. Calculations are performed on selected samples to gather more decisive information about the characteristics of the entire population, which enables a systematic way to test claims or ideas about the entire dataset.

Here is a simple example: A school principal reports that students in their school score an average of 7 out of 10 in exams. To test this “hypothesis,” we record marks of say 30 students (sample) from the entire student population of the school (say 300) and calculate the mean of that sample. We can then compare the (calculated) sample mean to the (reported) population mean and attempt to confirm the hypothesis.

To take another example, the annual return of a particular mutual fund is 8%. Assume that mutual fund has been in existence for 20 years. We take a random sample of annual returns of the mutual fund for, say, five years (sample) and calculate its mean. We then compare the (calculated) sample mean to the (claimed) population mean to verify the hypothesis.

This article assumes readers' familiarity with concepts of a normal distribution table, formula, p-value and related basics of statistics.

Different methodologies exist for hypothesis testing, but the same four basic steps are involved:

Usually, the reported value (or the claim statistics) is stated as the hypothesis and presumed to be true. For the above examples, the hypothesis will be:

• Example A: Students in the school score an average of 7 out of 10 in exams.
• Example B: The annual return of the mutual fund is 8% per annum.

This stated description constitutes the “ Null Hypothesis (H 0 ) ” and is  assumed  to be true – the way a defendant in a jury trial is presumed innocent until proven guilty by the evidence presented in court. Similarly, hypothesis testing starts by stating and assuming a “ null hypothesis ,” and then the process determines whether the assumption is likely to be true or false.

The important point to note is that we are testing the null hypothesis because there is an element of doubt about its validity. Whatever information that is against the stated null hypothesis is captured in the  Alternative Hypothesis (H 1 ).  For the above examples, the alternative hypothesis will be:

• Students score an average that is not equal to 7.
• The annual return of the mutual fund is not equal to 8% per annum.

In other words, the alternative hypothesis is a direct contradiction of the null hypothesis.

As in a trial, the jury assumes the defendant's innocence (null hypothesis). The prosecutor has to prove otherwise (alternative hypothesis). Similarly, the researcher has to prove that the null hypothesis is either true or false. If the prosecutor fails to prove the alternative hypothesis, the jury has to let the defendant go (basing the decision on the null hypothesis). Similarly, if the researcher fails to prove an alternative hypothesis (or simply does nothing), then the null hypothesis is assumed to be true.

The decision-making criteria have to be based on certain parameters of datasets.

The decision-making criteria have to be based on certain parameters of datasets and this is where the connection to normal distribution comes into the picture.

As per the standard statistics postulate about sampling distribution , for any sample size n, the sampling distribution of X is normal if the X from which the sample is drawn is normally distributed. Hence, the probabilities of all other possible sample mean that one could select are normally distributed.

For e.g., determine if the average daily return, of any stock listed on XYZ stock market , around New Year's Day is greater than 2%.

H 0 : Null Hypothesis: mean = 2%

H 1 : Alternative Hypothesis: mean > 2% (this is what we want to prove)

Take the sample (say of 50 stocks out of total 500) and compute the mean of the sample.

For a normal distribution, 95% of the values lie within two standard deviations of the population mean. Hence, this normal distribution and central limit assumption for the sample dataset allows us to establish 5% as a significance level. It makes sense as, under this assumption, there is less than a 5% probability (100-95) of getting outliers that are beyond two standard deviations from the population mean. Depending upon the nature of datasets, other significance levels can be taken at 1%, 5% or 10%. For financial calculations (including behavioral finance), 5% is the generally accepted limit. If we find any calculations that go beyond the usual two standard deviations, then we have a strong case of outliers to reject the null hypothesis.  

Graphically, it is represented as follows:

In the above example, if the mean of the sample is much larger than 2% (say 3.5%), then we reject the null hypothesis. The alternative hypothesis (mean >2%) is accepted, which confirms that the average daily return of the stocks is indeed above 2%.

However, if the mean of the sample is not likely to be significantly greater than 2% (and remains at, say, around 2.2%), then we CANNOT reject the null hypothesis. The challenge comes on how to decide on such close range cases. To make a conclusion from selected samples and results, a level of significance is to be determined, which enables a conclusion to be made about the null hypothesis. The alternative hypothesis enables establishing the level of significance or the "critical value” concept for deciding on such close range cases.

According to the textbook standard definition, “A critical value is a cutoff value that defines the boundaries beyond which less than 5% of sample means can be obtained if the null hypothesis is true. Sample means obtained beyond a critical value will result in a decision to reject the null hypothesis." In the above example, if we have defined the critical value as 2.1%, and the calculated mean comes to 2.2%, then we reject the null hypothesis. A critical value establishes a clear demarcation about acceptance or rejection.

This step involves calculating the required figure(s), known as test statistics (like mean, z-score , p-value , etc.), for the selected sample. (We'll get to these in a later section.)

With the computed value(s), decide on the null hypothesis. If the probability of getting a sample mean is less than 5%, then the conclusion is to reject the null hypothesis. Otherwise, accept and retain the null hypothesis.

There can be four possible outcomes in sample-based decision-making, with regard to the correct applicability to the entire population:

The “Correct” cases are the ones where the decisions taken on the samples are truly applicable to the entire population. The cases of errors arise when one decides to retain (or reject) the null hypothesis based on the sample calculations, but that decision does not really apply for the entire population. These cases constitute Type 1 ( alpha ) and Type 2 ( beta ) errors, as indicated in the table above.

Selecting the correct critical value allows eliminating the type-1 alpha errors or limiting them to an acceptable range.

Alpha denotes the error on the level of significance and is determined by the researcher. To maintain the standard 5% significance or confidence level for probability calculations, this is retained at 5%.

According to the applicable decision-making benchmarks and definitions:

• “This (alpha) criterion is usually set at 0.05 (a = 0.05), and we compare the alpha level to the p-value. When the probability of a Type I error is less than 5% (p < 0.05), we decide to reject the null hypothesis; otherwise, we retain the null hypothesis.”
• The technical term used for this probability is the p-value . It is defined as “the probability of obtaining a sample outcome, given that the value stated in the null hypothesis is true. The p-value for obtaining a sample outcome is compared to the level of significance."
• A Type II error, or beta error, is defined as the probability of incorrectly retaining the null hypothesis, when in fact it is not applicable to the entire population.

A few more examples will demonstrate this and other calculations.

A monthly income investment scheme exists that promises variable monthly returns. An investor will invest in it only if they are assured of an average $180 monthly income. The investor has a sample of 300 months’ returns which has a mean of $190 and a standard deviation of $75. Should they invest in this scheme?

Let’s set up the problem. The investor will invest in the scheme if they are assured of the investor's desired $180 average return.

H 0 : Null Hypothesis: mean = 180

H 1 : Alternative Hypothesis: mean > 180

Method 1: Critical Value Approach

Identify a critical value X L for the sample mean, which is large enough to reject the null hypothesis – i.e. reject the null hypothesis if the sample mean >= critical value X L

P (identify a Type I alpha error) = P (reject H 0  given that H 0  is true),

This would be achieved when the sample mean exceeds the critical limits.

= P (given that H 0  is true) = alpha

Graphically, it appears as follows:

Taking alpha = 0.05 (i.e. 5% significance level), Z 0.05  = 1.645 (from the Z-table or normal distribution table)

           = > X L  = 180 +1.645*(75/sqrt(300)) = 187.12

Since the sample mean (190) is greater than the critical value (187.12), the null hypothesis is rejected, and the conclusion is that the average monthly return is indeed greater than $180, so the investor can consider investing in this scheme.

Method 2: Using Standardized Test Statistics

One can also use standardized value z.

Test Statistic, Z = (sample mean – population mean) / (std-dev / sqrt (no. of samples).

Then, the rejection region becomes the following:

Z= (190 – 180) / (75 / sqrt (300)) = 2.309

Our rejection region at 5% significance level is Z> Z 0.05  = 1.645.

Since Z= 2.309 is greater than 1.645, the null hypothesis can be rejected with a similar conclusion mentioned above.

Method 3: P-value Calculation

We aim to identify P (sample mean >= 190, when mean = 180).

= P (Z >= (190- 180) / (75 / sqrt (300))

= P (Z >= 2.309) = 0.0084 = 0.84%

The following table to infer p-value calculations concludes that there is confirmed evidence of average monthly returns being higher than 180:

A new stockbroker (XYZ) claims that their brokerage fees are lower than that of your current stock broker's (ABC). Data available from an independent research firm indicates that the mean and std-dev of all ABC broker clients are $18 and $6, respectively.

A sample of 100 clients of ABC is taken and brokerage charges are calculated with the new rates of XYZ broker. If the mean of the sample is $18.75 and std-dev is the same ($6), can any inference be made about the difference in the average brokerage bill between ABC and XYZ broker?

H 0 : Null Hypothesis: mean = 18

H 1 : Alternative Hypothesis: mean <> 18 (This is what we want to prove.)

Rejection region: Z <= - Z 2.5  and Z>=Z 2.5  (assuming 5% significance level, split 2.5 each on either side).

Z = (sample mean – mean) / (std-dev / sqrt (no. of samples))

= (18.75 – 18) / (6/(sqrt(100)) = 1.25

This calculated Z value falls between the two limits defined by:

- Z 2.5  = -1.96 and Z 2.5  = 1.96.

This concludes that there is insufficient evidence to infer that there is any difference between the rates of your existing broker and the new broker.

Alternatively, The p-value = P(Z< -1.25)+P(Z >1.25)

= 2 * 0.1056 = 0.2112 = 21.12% which is greater than 0.05 or 5%, leading to the same conclusion.

Graphically, it is represented by the following:

Criticism Points for the Hypothetical Testing Method:

• A statistical method based on assumptions
• Error-prone as detailed in terms of alpha and beta errors
• Interpretation of p-value can be ambiguous, leading to confusing results

Hypothesis testing allows a mathematical model to validate a claim or idea with a certain confidence level. However, like the majority of statistical tools and models, it is bound by a few limitations. The use of this model for making financial decisions should be considered with a critical eye, keeping all dependencies in mind. Alternate methods like  Bayesian Inference are also worth exploring for similar analysis.

Gregory J. Privitera. " Chapter 8: Introduction to Hypothesis Testing ." Statistics for Behavioral Sciences, Part III: Probability and the Foundations of Inferential Statistics. Sage Publications , pp. 4-5.

Rice University, OpenStax. " Introductory Statistics 2e: 7.1 The Central Limit Theorem for Sample Means (Averages) ."

Gregory J. Privitera. " Chapter 8: Introduction to Hypothesis Testing ." Statistics for Behavioral Sciences, Part III: Probability and the Foundations of Inferential Statistics. Sage Publications , pp. 5-6.

Gregory J. Privitera. " Chapter 8: Introduction to Hypothesis Testing ." Statistics for Behavioral Sciences, Part III: Probability and the Foundations of Inferential Statistics. Sage Publications , pp. 13.

Gregory J. Privitera. " Chapter 8: Introduction to Hypothesis Testing ." Statistics for Behavioral Sciences, Part III: Probability and the Foundations of Inferential Statistics. Sage Publications , pp. 6.

Gregory J. Privitera. " Chapter 8: Introduction to Hypothesis Testing ." Statistics for Behavioral Sciences, Part III: Probability and the Foundations of Inferential Statistics. Sage Publications , pp. 6-7.

Gregory J. Privitera. " Chapter 8: Introduction to Hypothesis Testing ." Statistics for Behavioral Sciences, Part III: Probability and the Foundations of Inferential Statistics. Sage Publications , pp. 10.

Gregory J. Privitera. " Chapter 8: Introduction to Hypothesis Testing ." Statistics for Behavioral Sciences, Part III: Probability and the Foundations of Inferential Statistics. Sage Publications , pp. 11.

Gregory J. Privitera. " Chapter 8: Introduction to Hypothesis Testing ." Statistics for Behavioral Sciences, Part III: Probability and the Foundations of Inferential Statistics. Sage Publications , pp. 7, 10-11.

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What Is Hypothesis Testing? An In-Depth Guide with Python Examples

Hypothesis testing allows us to make data-driven decisions by testing assertions about populations. It is the backbone behind scientific research, business analytics, financial modeling, and more.

This comprehensive guide aims to solidify your understanding with:

• Explanations of key terminology and the overall hypothesis testing process
• Python code examples for t-tests, z-tests, chi-squared, and other methods
• Real-world examples spanning science, business, politics, and technology
• A frank discussion around limitations and misapplications
• Next steps to mastering practical statistics with Python

So let‘s get comfortable with making statements, gathering evidence, and letting the data speak!

Fundamentals of Hypothesis Testing

Hypothesis testing is structured around making a claim in the form of competing hypotheses, gathering data, performing statistical tests, and making decisions about which hypothesis the evidence supports.

Here are some key terms about hypotheses and the testing process:

Null Hypothesis ($H_0$): The default statement about a population parameter. Generally asserts that there is no statistical significance between two data sets or that a sample parameter equals some claimed population parameter value. The statement being tested that is either rejected or supported.

Alternative Hypothesis ($H_1$): The statement that sample observations indicate statistically significant effect or difference from what the null hypothesis states. $H_1$ and $H_0$ are mutually exclusive, meaning if statistical tests support rejecting $H_0$, then you conclude $H_1$ has strong evidence.

Significance Level ($\alpha$): The probability of incorrectly rejecting a true null hypothesis, known as making a Type I error. Common significance levels are 90%, 95%, and 99%. The lower significance level, the more strict the criteria is for rejecting $H_0$.

Test Statistic: Summary calculations of sample data including mean, proportion, correlation coefficient, etc. Used to determine statistical significance and improbability under $H_0$.

P-value: Probability of obtaining sample results at least as extreme as the test statistic, assuming $H_0$ is true. Small p-values indicate strong statistical evidence against the null hypothesis.

Type I Error: Incorrectly rejecting a true null hypothesis

Type II Error : Failing to reject a false null hypothesis

These terms set the stage for the overall process:

1. Make Hypotheses

Define the null ($H_0$) and alternative hypothesis ($H_1$).

2. Set Significance Level

Typical significance levels are 90%, 95%, and 99%. Higher significance means more strict burden of proof for rejecting $H_0$.

3. Collect Data

Gather sample and population data related to the hypotheses under examination.

4. Determine Test Statistic

Calculate relevant test statistics like p-value, z-score, t-statistic, etc along with degrees of freedom.

5. Compare to Significance Level

If the test statistic falls in the critical region based on the significance, reject $H_0$, otherwise fail to reject $H_0$.

6. Draw Conclusions

Make determinations about hypotheses given the statistical evidence and context of the situation.

Now that you know the process and objectives, let’s apply this to some concrete examples.

Python Examples of Hypothesis Tests

We‘ll demonstrate hypothesis testing using Numpy, Scipy, Pandas and simulated data sets. Specifically, we‘ll conduct and interpret:

• Two sample t-tests
• Paired t-tests
• Chi-squared tests

These represent some of the most widely used methods for determining statistical significance between groups.

We‘ll plot the data distributions to check normality assumptions where applicable. And determine if evidence exists to reject the null hypotheses across several scenarios.

Two Sample T-Test with NumPy

Two sample t-tests determine whether the mean of a numerical variable differs significantly across two independent groups. It assumes observations follow approximate normal distributions within each group, but not that variances are equal.

Let‘s test for differences in reported salaries at hypothetical Company X vs Company Y:

$H_0$ : Average reported salaries are equal at Company X and Company Y

$H_1$ : Average reported salaries differ between Company X and Company Y

First we‘ll simulate salary samples for each company based on random normal distributions, set a 95% confidence level, run the t-test using NumPy, then interpret.

The t-statistic of 9.35 shows the difference between group means is nearly 9.5 standard errors. The very small p-value rejects the idea the salaries are equal across a randomly sampled population of employees.

Since the test returned a p-value lower than the significance level, we reject $H_0$, meaning evidence supports $H_1$ that average reported salaries differ between these hypothetical companies.

Paired T-Test with Pandas

While an independent groups t-test analyzes mean differences between distinct groups, a paired t-test looks for significant effects pre vs post some treatment within the same set of subjects. This helps isolate causal impacts by removing effects from confounding individual differences.

Let‘s analyze Amazon purchase data to determine if spending increases during the holiday months of November and December.

$H_0$ : Average monthly spending is equal pre-holiday and during the holiday season

$H_1$ : Average monthly spending increases during the holiday season

We‘ll import transaction data using Pandas, add seasonal categories, then run and interpret the paired t-test.

Since the p-value is below the 0.05 significance level, we reject $H_0$. The output shows statistically significant evidence at 95% confidence that average spending increases during November-December relative to January-October.

Visualizing the monthly trend helps confirm the spike during the holiday months.

Single Sample Z-Test with NumPy

A single sample z-test allows testing whether a sample mean differs significantly from a population mean. It requires knowing the population standard deviation.

Let‘s test if recently surveyed shoppers differ significantly in their reported ages from the overall customer base:

$H_0$ : Sample mean age equals population mean age of 39

$H_1$ : Sample mean age does not equal population mean of 39

Here the absolute z-score over 2 and p-value under 0.05 indicates statistically significant evidence that recently surveyed shopper ages differ from the overall population parameter.

Chi-Squared Test with SciPy

Chi-squared tests help determine independence between categorical variables. The test statistic measures deviations between observed and expected outcome frequencies across groups to determine magnitude of relationship.

Let‘s test if credit card application approvals are independent across income groups using simulated data:

$H_0$ : Credit card approvals are independent of income level

$H_1$ : Credit approvals and income level are related

Since the p-value is greater than the 0.05 significance level, we fail to reject $H_0$. There is not sufficient statistical evidence to conclude that credit card approval rates differ by income categories.

ANOVA with StatsModels

Analysis of variance (ANOVA) hypothesis tests determine if mean differences exist across more than two groups. ANOVA expands upon t-tests for multiple group comparisons.

Let‘s test if average debt obligations vary depending on highest education level attained.

$H_0$ : Average debt obligations are equal across education levels

$H_1$ : Average debt obligations differ based on education level

We‘ll simulate ordered education and debt data for visualization via box plots and then run ANOVA.

The ANOVA output shows an F-statistic of 91.59 that along with a tiny p-value leads to rejecting $H_0$. We conclude there are statistically significant differences in average debt obligations based on highest degree attained.

The box plots visualize these distributions and means vary across four education attainment groups.

Real World Hypothesis Testing

Hypothesis testing forms the backbone of data-driven decision making across science, research, business, public policy and more by allowing practitioners to draw statistically-validated conclusions.

Here is a sample of hypotheses commonly tested:

• Ecommerce sites test if interface updates increase user conversions
• Ridesharing platforms analyze if surge pricing reduces wait times
• Subscription services assess if free trial length impacts customer retention
• Manufacturers test if new production processes improve output yields

Pharmaceuticals

• Drug companies test efficacy of developed compounds against placebo groups
• Clinical researchers evaluate impacts of interventions on disease factors
• Epidemiologists study if particular biomarkers differ in afflicted populations
• Software engineers measure if algorithm optimizations improve runtime complexity
• Autonomous vehicles assess whether new sensors reduce accident rates
• Information security analyzes if software updates decrease vulnerability exploits

Politics & Social Sciences

• Pollsters determine if candidate messaging influences voter preference
• Sociologists analyze if income immobility changed across generations
• Climate scientists examine anthropogenic factors contributing to extreme weather

This represents just a sample of the wide ranging real-world applications. Properly formulated hypotheses, statistical testing methodology, reproducible analysis, and unbiased interpretation helps ensure valid reliable findings.

However, hypothesis testing does still come with some limitations worth addressing.

Limitations and Misapplications

While hypothesis testing empowers huge breakthroughs across disciplines, the methodology does come with some inherent restrictions:

Over-reliance on p-values

P-values help benchmark statistical significance, but should not be over-interpreted. A large p-value does not necessarily mean the null hypothesis is 100% true for the entire population. And small p-values do not directly prove causality as confounding factors always exist.

Significance also does not indicate practical real-world effect size. Statistical power calculations should inform necessary sample sizes to detect desired effects.

Errors from Multiple Tests

Running many hypothesis tests by chance produces some false positives due to randomness. Analysts should account for this by adjusting significance levels, pre-registering testing plans, replicating findings, and relying more on meta-analyses.

Poor Experimental Design

Bad data, biased samples, unspecified variables, and lack of controls can completely undermine results. Findings can only be reasonably extended to populations reflected by the test samples.

Garbage in, garbage out definitely applies to statistical analysis!

Assumption Violations

Most common statistical tests make assumptions about normality, homogeneity of variance, independent samples, underlying variable relationships. Violating these premises invalidates reliability.

Transformations, bootstrapping, or non-parametric methods can help navigate issues for sound methodology.

Lack of Reproducibility

The replication crisis impacting scientific research highlights issues around lack of reproducibility, especially involving human participants and high complexity systems. Randomized controlled experiments with strong statistical power provide much more reliable evidence.

While hypothesis testing methodology is rigorously developed, applying concepts correctly proves challenging even among academics and experts!

Next Level Hypothesis Testing Mastery

We‘ve covered core concepts, Python implementations, real-world use cases, and inherent limitations around hypothesis testing. What should you master next?

Parametric vs Non-parametric

Learn assumptions and application differences between parametric statistics like z-tests and t-tests that assume normal distributions versus non-parametric analogs like Wilcoxon signed-rank tests and Mann-Whitney U tests.

Effect Size and Power

Look beyond just p-values to determine practical effect magnitude using indexes like Cohen‘s D. And ensure appropriate sample sizes to detect effects using prospective power analysis.

Alternatives to NHST

Evaluate Bayesian inference models and likelihood ratios that move beyond binary reject/fail-to-reject null hypothesis outcomes toward more integrated evidence.

Tiered Testing Framework

Construct reusable classes encapsulating data processing, visualizations, assumption checking, and statistical tests for maintainable analysis code.

Big Data Integration

Connect statistical analysis to big data pipelines pulling from databases, data lakes and APIs at scale. Productionize analytics.

I hope this end-to-end look at hypothesis testing methodology, Python programming demonstrations, real-world grounding, inherent restrictions and next level considerations provides a launchpad for practically applying core statistics! Please subscribe using the form below for more data science tutorials.

Dr. Alex Mitchell is a dedicated coding instructor with a deep passion for teaching and a wealth of experience in computer science education. As a university professor, Dr. Mitchell has played a pivotal role in shaping the coding skills of countless students, helping them navigate the intricate world of programming languages and software development.

Beyond the classroom, Dr. Mitchell is an active contributor to the freeCodeCamp community, where he regularly shares his expertise through tutorials, code examples, and practical insights. His teaching repertoire includes a wide range of languages and frameworks, such as Python, JavaScript, Next.js, and React, which he presents in an accessible and engaging manner.

Dr. Mitchell’s approach to teaching blends academic rigor with real-world applications, ensuring that his students not only understand the theory but also how to apply it effectively. His commitment to education and his ability to simplify complex topics have made him a respected figure in both the university and online learning communities.

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