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Steps Involved in Hypothesis Testing

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4 views

Steps Involved in Hypothesis Testing

Uploaded by

smita01052000
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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STEPS INVOLVED IN HYPOTHESIS TESTING

1. Formulate the null hypothesis, with the HO and HA, the alternate
hypothesis: The normal approach is to set two hypotheses
instead of one, in such a way, that if one hypothesis is true, the
other is false. Alternatively, if one hypothesis is false or
rejected, then the other is true or accepted. These two
hypotheses are: 1. Null hypothesis 2) Alternate hypothesis
Let us assume that the mean of the population is µ0, and the
mean of the sample is x. Since we have assumed that the
population has a mean of µ0, that is our null hypothesis. We
write this as H0µ= µ0, where H0 is the null hypothesis. Alternate
hypothesis is HA= µ. The rejection of null hypothesis will show
that the mean of the population is not µ0. This implies that
alternate hypothesis is accepted.

2. Significance level: Having formulated the hypothesis, the next


step is its validity at a certain level of significance. The
confidence with which a null hypothesis is accepted or rejected
depends upon the significance level. A significance level of say
5 % means that the risk of making a wrong decision is 5 %. The
researcher is likely to be wrong in accepting false hypothesis or
rejecting a true hypothesis by 5 out of 100 occasions. A
significance level of say 1% means, that the researcher is
running the risk of being wrong in accepting or rejecting the
hypothesis is one of every 100 occasions. Therefore, a 1% level
of significance level provides greater confidence to the decision
than 5% significance level.
There are two types of tests
One-tailed and two-tailed tests
A hypothesis test may be one-tailed or two-tailed. In one-tailed
test the test-statistic for rejecting of null hypothesis falls only in
one-tailed of sampling distribution curve.
A two-tailed test is one in which the test statistics leading to
rejection of null hypothesis falls on both the tails of the
sampling distribution.
One-tailed test is used when the researcher’s interest is primarily
on one-side of the issue. Example: “Is the current advertisement
less effective than the proposed new advertisement”.
A two-tailed test is used when the researcher has no reason to
focus on one side of the issue. Example: “Are the two markets-
Mumbai and Delhi different to test market a product?”

3. Degree of freedom: It tells the researcher the number of


elements that can be chosen freely.

4. Select test criteria: If the hypothesis pertains to a larger sample (


30 or more), the z test is used. When the sample is small (less
than 30), the t test is used.

5. Compute: Carry out computation

6. Make decisions: Accepting or rejecting of the null hypothesis


depends on whether the computed value falls in the region of
rejection at a given level of significance.

TYPES OF STATISTICAL TESTS:


1. Parametric test
2. Non- parametric test.
PARAMETRIC TEST
1. Parametric tests are more powerful. The data in this test is
derived from interval or ratio measurement.
2. In parametric tests it is assumed that the data follows a
normal distributions. Examples are: (a) Z –Test (b) T-Test
and (c) F-Test.
3. Observations must be independent i.e., selection of any one
item should not affect the chances of selecting any others be
included in the sample.

NON-PARAMETRIC TEST
1. We do not make assumptions about the shape of
population distribution.
2. These tests are distribution-free tests.
3. The hypothesis of non-parametric test is concerned with
something other than the value of a population parameter.
4. Easy to compute: There are certain situations particularly
in marketing research, where the assumptions of
parametric tests are not valid. Example: In a parametric
test, we assume that data collected follows a normal
distribution. In such cases, non-parametric tests are (a)
Binomial test (b) Chi-square test (c) Mann-Whitney U test
(d) Sign test. A binomial test is used when the population
has only two classes such as male, female; buyers and non-
buyers, success, failure etc. All observations made about
the population must fall into one of the two tests. The
binomial test is used when the sample size is small.

Advantage:
1. They are quick and easy to use.
2. When data are not very accurate, these tests produce
fairly good results.
Disadvantages:
Non-parametric test involves the greater risk of accepting
a false hypothesis and thus committing a type -2 error.
Univariate/Bivariate Data Analysis:
Univariate: If we wish to analyse one variable at a time,
this is called univariate analysis. Example: Effect of sales
on pricing. Here, price is an independent variable and sales
is a dependent variable. Change the price and measuring
the sales.

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