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Chapter 7

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Chapter 7

Statistical Inference
Chapter 8
Trendlines and Regression Analysis

Statistical Inference

Statistical inference (thống kê suy luận) focuses on drawing conclusions about populations from
samples.

◦ Statistical inference includes estimation of population parameters (tham số) and


hypothesis testing, which involves drawing conclusions about the value of the
parameters of one or more populations.

Hypothesis Testing

Hypothesis testing involves drawing inferences about two contrasting propositions (each called a
hypothesis) relating to the value of one or more population parameters.

H0: Null hypothesis: describes an existing theory

H1: Alternative hypothesis: the complement of H0

Using sample data, we either:

- reject H0 and conclude the sample data provides

sufficient evidence to support H1, or

- fail to reject H0 and conclude the sample data

does not support H1.

Hypothesis Testing Procedure

Steps in conducting a hypothesis test:

1. Identify the population parameter and formulate the hypotheses to test.

2. Select a level of significance (the risk of drawing an incorrect conclusion).

3. Determine the decision rule on which to base a conclusion.

4. Collect data and calculate a test statistic.

5. Apply the decision rule and draw a conclusion.

One-Sample Hypothesis Tests

Three types of one sample tests:

1. H0: parameter ≤ constant

H1: parameter > constant

2. H0: parameter ≥ constant

H1: parameter < constant


3. H0: parameter = constant

H1: parameter ≠ constant

It is not correct to formulate a null hypothesis using >, <, or ≠.

Determining the Proper Form of Hypotheses

Hypothesis testing always assumes that H0 is true and uses sample data to determine whether H1
is more likely to be true.

◦ Statistically, we cannot “prove” that H0 is true; we can only fail to reject it.

Rejecting the null hypothesis provides strong evidence (in a statistical sense) that the null
hypothesis is not true and that the alternative hypothesis is true.

Therefore, what we wish to provide evidence for statistically should be identified as the
alternative hypothesis.

Understanding Potential Errors in Hypothesis Testing

Hypothesis testing can result in one of four different outcomes:

1. H0 is true and the test correctly fails to reject H0

2. H0 is false and the test correctly rejects H0

3. H0 is true and the test incorrectly rejects H0 (called Type I error)

4. H0 is false and the test incorrectly fails to reject H0 (called Type II error)

Terminology

The probability of making a Type I error = α (level of significance) = P(rejecting H0 | H0 is true)

◦ The value of 1 – a is called the confidence coefficient

= P(not rejecting H0 | H0 is true),

◦ The value of α can be controlled. Common values are 0.01, 0.05, or 0.10.

The probability of making a Type II error = β = P(not rejecting H0 | H0 is false)

◦ The value of 1 - β is called the power of the test

= P(rejecting H0 | H0 is false).

◦ The value of β cannot be specified in advance and depends on the value of the
(unknown) population parameter.

Improving the Power of the Test

We would like the power of the test to be high (equivalently, we would like the probability of a
Type II error to be low) to allow us to make a valid conclusion.

The power of the test is sensitive to the sample size; small sample sizes generally result in a low
value of 1 - b.
The power of the test can be increased by taking larger samples, which enable us to detect small
differences between the sample statistics and population parameters with more accuracy.

If you choose a small level of significance, you should try to compensate by having a large sample
size.

Selecting the Test Statistic

The decision to reject or fail to reject a null hypothesis is based on computing a test statistic
from the sample data.

The test statistic used depends on the type of hypothesis test.

◦ Test statistics for one-sample hypothesis tests for means:

Drawing a Conclusion

The conclusion to reject or fail to reject H0 is based on comparing the value of the test statistic to
a “critical value” from the sampling distribution of the test statistic when the null
hypothesis is true and the chosen level of significance, a.

◦ The sampling distribution of the test statistic is usually the normal distribution, t-
distribution, or some other well-known distribution.

The critical value divides the sampling distribution into two parts, a rejection region and a non-
rejection region. If the test statistic falls into the rejection region, we reject the null
hypothesis; otherwise, we fail to reject it.

Rejection Regions
p-Values

A p-value (observed significance level) is the probability of obtaining a test statistic value equal
to or more extreme than that obtained from the sample data when the null hypothesis is
true.

If p < .10 → “marginally significant”

If p < .05 → “significant”

If p < .01 → “highly significant.”

Reject H0 if the p-value < α

Two independent samples t-test

Testing the relationship between two independent samples is very common in market research.

Some common research questions are:

◦ Do heavy and light users’ satisfaction with a product differ?

◦ Do male customers spend more money online than female customers?

◦ Do US teenagers spend more time on Facebook than Australian teenagers?

Each of these hypotheses aim at evaluating whether two populations (e.g., heavy and light
users), represented by samples, are significantly different in terms of certain key variables
(e.g., satisfaction ratings).

Steps and results: see the attached ppt file

One-Sample Tests for Proportions


Test statistic:

p0 is the hypothesized value and p is the sample proportion

Two-Sample Hypothesis Tests

Lower-tailed test

◦ H0: population parameter (1) - population parameter (2) ≥ D0

◦ H1: population parameter (1) - population parameter (2) < D0

◦ This test seeks evidence that the difference between population parameter (1) and
population parameter (2) is less than some value, D0.

◦ When D0 = 0, the test simply seeks to conclude whether population parameter (1) is
smaller than population parameter (2).

Upper-tailed test

◦ H0: population parameter (1) - population parameter (2) ≤ D0

◦ H1: population parameter (1) - population parameter (2) > D0

◦ This test seeks evidence that the difference between population parameter (1) and
population parameter (2) is greater than some value, D0.

◦ When D0 = 0, the test simply seeks to conclude whether population parameter (1) is
larger than population parameter (2).

Two-tailed test

◦ H0: population parameter (1) - population parameter (2) = D0

◦ H1: population parameter (1) - population parameter (2) ≠ D0

◦ This test seeks evidence that the difference between the population parameters is
equal to D0.

◦ When D0 = 0, we are seeking evidence that population parameter (1) differs from
population parameter (2).

In most applications, D0 = 0, and we are simply seeking to compare the


population parameters.
Excel Analysis Toolpak Procedures for Two-Sample Hypothesis Tests

Two-Sample Tests for Difference in Means

Forms of the hypothesis test:

Selecting the Proper Excel Procedure

 Population variances are known:

 z-Test: Two-Sample for Means

 Population variances are unknown and assumed unequal:

 t-Test: Two-Sample Assuming Unequal Variances

 Population variances are unknown but assumed equal:

 t-Test: Two-Sample Assuming Equal Variances

These tools calculate the test statistic, the p-value for both a one-tail and two-tail test, and the
critical values for one-tail and two-tail tests.

Only rarely are the population variances known; also, it is often difficult to justify the
assumption that the variances of each population are equal.

Therefore, in most practical situations, we use the t-test: Two-Sample Assuming Unequal
Variances

Intepreting Excel Output

If the test statistic is negative, the one-tailed p-value is the correct p-value for a lower-tail test;
however, for an upper-tail test, you must subtract this number from 1.0 to get the correct p-
value.
If the test statistic is nonnegative (positive or zero), then the p-value in the output is the correct
p-value for an upper-tail test; but for a lower-tail test, you must subtract this number from
1.0 to get the correct p-value.

For a lower-tail test, you must change the sign of the one-tailed critical value.

Two-Sample Test for Means with Paired Samples

In many situations, data from two samples are naturally paired or matched.

When paired samples are used, a paired t-test is more accurate than assuming that the data
come from independent populations.

Hypotheses (mD is the mean difference between the paired samples):

Excel Data Analysis tool: t-Test: Paired Two-Sample for Means

Test for Equality of Variances

Test for equality of variances between two samples using a new type of test, the F-test.

◦ To use this test, we must assume that both samples are drawn from normal
populations.

Hypotheses:

F-test statistic:

Excel tool: F-test for Equality of Variances

F-Distribution

The F-distribution has two degrees of freedom, one associated with the numerator of the F-
statistic, n1 - 1, and one associated with the denominator of the F-statistic, n2 - 1.

Table 4, Appendix A provides only upper-tail critical values, and the distribution is not symmetric.
Conducting the F-Test

Although the hypothesis test is really a two-tailed test, we will simplify it as an upper-tailed, one-
tailed test to make it easy to use tables of the F-distribution and interpret the results of the
Excel tool.

◦ We do this by ensuring that when we compute F, we take the ratio of the larger
sample variance to the smaller sample variance.

Find the critical value Fa/2,df1,df2 of the F-distribution, and then we reject the null hypothesis if the
F-test statistic exceeds the critical value.

Note that we are using a/2 to find the critical value, not a. This is because we are using only the
upper tail information on which to base our conclusion.

Analysis of Variance (ANOVA)

Used to compare the means of two or more population groups.

ANOVA derives its name from the fact that we are analyzing variances in the data.

ANOVA measures variation between groups relative to variation within groups.

Analysis of Variance (ANOVA)

In probability theory and statistics, variance is the expectation of the squared deviation of a
random variable from its population mean or sample mean.

Variance is a measure of dispersion, meaning it is a measure of how far a set of numbers is


spread out from their average value.

Example of samples from two populations with the same mean but different variances. The red
population has mean 100 and variance 100 (SD=10) while the blue population has mean 100
and variance 2500 (SD=50).

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