STATISTICS

Inferential statistics

Inferential statistics are used to draw inferences about a population from a sample.

Example consider an experiment in which 10 subjects who performed a task after 24 hours of sleep deprivation scored 12
points lower than 10 subjects who performed after a normal night's sleep. Is the difference real or could it be due to
chance? How much larger could the real difference be than the 12 points found in the sample? These are the types of
questions answered by inferential statistics.

Two main methods used in inferential statistics

estimation
o the sample is used to estimate a parameter, and
o a confidence interval about the estimate is constructed.
hypothesis testing
o a "straw man" null hypothesis is put forward, and
o it is determined whether the data are strong enough to reject it
o Example for the sleep deprivation study, the null hypothesis would be that sleep deprivation has no effect
on performance

Parameter

A parameter is a numerical quantity measuring some aspect of a population of scores.

Example the mean is a measure of central tendency.

Parameters are rarely known and are usually estimated via samples.

Confidence interval

A confidence interval is a range of values computed in such a way that it contains the estimated parameter a high
proportion of the time.

Example

the 95% confidence interval is constructed so that 95% of such intervals will contain the parameter
if the parameter being estimated were , the 95% confidence interval might look like the following: 12.5 30.2

Important parameters

To the right of each Greek symbol is the symbol for the associated statistic used to estimate it from a sample.

Quantity Parameter Statistic

Mean M
Standard deviation s
Proportion p
Correlation r
Variance and standard deviation

The variance and the closely-related standard deviation are measures of how spread out a distribution is. In other words,
they are measures of variability.

The variance is computed as the average squared deviation of each number from its mean. For example, for the numbers 1,
2, and 3, the mean is 2 and the variance is:

Formula for variance in a population

where is the mean and N is the number of scores.

Formula for variance in a sample

should be

where M is the mean of the sample.

but S is a biased estimate of .

so the actual formula is (Bessels correction)

Formula for standard deviation it is the square root of the variance.

Important for a normal distribution, if the mean and standard deviation of a normal distribution are known, it is possible
to compute the percentile rank for any given score. That is

~68 % of the scores are within one standard deviation of the mean
~95 % of the scores are within two standard deviations of the mean
~99.7 % of the scores are within three standard deviations of the mean

If variable Y is a linear transformation of X, meaning Y = b * X + A, then

standard deviation of Y is b * x (where x is, of course, the standard deviation of X).

variance of Y is
Proportion

Assume that 0.80 of students can pass a test so for this population, the parameter (0.80 in this case) is used to
designate the proportion of subjects in the population that pass the test.

A random sample of size N = 20 students is chosen and tested: 13 passed and 7 failed so for this sample, and
the statistic p (13/20 = 0.65 in this case) is used to designate the proportion of subjects in the sample that pass the test.

If repeated samples of size N were taken from the population and the proportion passing (p) were determined for each
sample, a distribution of values of p would be formed.

If the sampling went on forever, the distribution would be the sampling distribution of a proportion.

The sampling distribution of a proportion is equal to the binomial distribution.

The mean and standard deviation are

For the present example

N = 20, = 0.80, therefore the sampling distribution of p has mean = 0.8 and standard deviation = 0.089

The sampling distribution of p will look like below

Problem given a population of people applying for a job, 40% are able to pass the test. Out of a group of 20 applicants,
what is the probability that 50% or more of them will pass?

Solution

we have N = 20, and = 0.40

therefore we have a sampling distribution of p with = 0.40 and standard deviation = 0.11
we assume a normal distribution
so now we need to compute: if p has a distribution with = 0.40 and standard deviation = 0.11, what is the
probability that p > 50%, meaning p > 0.5?
using a z table it can be calculated that is answer is: 0.1819 of the area (see below)

So, the probability that 50% of the applicants in a sample of size = 20 can pass the test (taken from a population where 40%
of the subjects can pass the test) is only ~18%.
Skew

A distribution is skewed if one of its tails is longer than the other.

Skew can be calculated as:

where, of course, is the mean and is the standard deviation

As a general rule: for positive skew, mean > median. The reverse is true for negative skew.
Arithmetic mean

= X/N

The sum of squared deviations of scores from their mean is lower than their squared deviations from any other number.

Trimmed mean

The trimmed mean is calculated by discarding a certain percentage of the lowest and the highest scores and then
computing the mean of the remaining scores.

For example, a mean trimmed 50% is computed by discarding the lower and higher 25% of the scores and taking the mean
of the remaining scores.

Trimean

The trimean is computed by adding the 25th percentile, plus twice the 50th percentile, plus the 75th percentile and dividing
by four.

For example, assume the 25th, 50th, and 75th percentile of the dataset are 51, 55, and 63 respectively. Therefore, the
trimean is computed as:

Geometric mean

The geometric mean is the nth root of the product of the scores.

Thus, the geometric mean of the scores: 1, 2, 3, and 10 is the fourth root of 1 x 2 x 3 x 10 which is the fourth root of 60
which equals 2.78.

Geometric mean =

The geometric mean is an appropriate measure to use for averaging rates.

Example Consider a stock portfolio that began with a value of $1,000 and had annual returns of 13%, 22%, 12%, -5%, and -
13%.

The question is how to compute the CAGR (Compounded Growth of Return)? The answer is to compute the geometric
mean of the returns.

The multipliers for this example are 1.13, 1.22, 1.12, 0.95, and 0.87. The geometric mean of these multipliers is 1.05.
Therefore, the average annual rate of return is 5%.

Median

The median is the middle of a distribution: half the scores are above the median and half are below the median.

The sum of the absolute deviations of each number from the median is lower than is the sum of absolute deviations from
any other number.
Correlation

The correlation between two variables reflects the degree to which the variables are related.

The most common measure of correlation is Pearson's correlation, which reflects the degree of linear relationship between
two variables. It ranges from +1 to -1.

In a population is designated by the Greek letter rho ().

In a sample it is designated by the letter "r" (and is sometimes called "Pearson's r.")

Formula for Persons r

If the numbers X and Y are converted into z-scores, the formula is simpler

To convert to z-scores, remember that a normal distribution can be converted into a standard normal distribution (which
is a normal distribution with a mean of 0 and a standard deviation of 1), via the formula below, which reflects the number
of standard deviations above or below the mean.

Spearman's rho is, too, a measure of the linear relationship between two variables.
It differs from Pearson's correlation only in that the computations are done after the numbers are converted to ranks.

Normal distributions

Are important because: 1) many variables are distributed approximately normally; 2) are easy to work with; 3) if
the mean and standard deviation of a normal distribution are known, it is easy to convert back and forth from raw scores
to percentiles.

How to convert from raw scores to percentiles

Problem assume a test is normally distributed with a mean of 80 and a standard deviation of 5.
What is the percentile rank of a student who received a score of 75 on the test?

Solution

Compute , (in this case -1, so one standard deviation below the mean), then use a z-table to find out that
15.9% of the scores are at least one standard deviation below the mean, so 84.1% of the students ranked above our
student.
Sampling distribution

If you compute the mean of a sample of N = 10 numbers, the value you obtain will not equal the population mean exactly;
by chance it will be a little bit higher or a little bit lower.

If you sampled sets of size N = 10 numbers over and over again (computing the mean for each set), you would find that
some sample means come much closer to the population mean than others, some would be higher than the population
mean and some would be lower.

If you sampled sets of size N =10 numbers over and over again, say about 1,000 times, and then you constructed a
relative frequency distribution of those 1,000 means, then this distribution of means is a very good approximation to the
sampling distribution of the mean.

The sampling distribution of the mean is a theoretical distribution that is approached as the number of samples in the
relative frequency distribution increases.

As the number of samples approaches infinity, the relative frequency distribution approaches the sampling distribution.

A sampling distribution can also be defined as the relative frequency distribution that would be obtained if all possible
samples of a particular sample size were taken.

Sampling distribution of the mean

Given a population with a mean of and a standard deviation of the sampling distribution of the mean has a mean of
and a standard deviation of

, where n is the sample size.

The standard deviation of the sampling distribution of the mean is called the standard error of the mean. It is designated
by the symbol: M

Note that the spread of the sampling distribution of the mean decreases as the sample size increases.

In general, the standard error of a statistic is the standard deviation of the sampling distribution of that statistic.

The standard error of the mean is, as said above,

The standard error of the median is

The standard error of the proportion is

Central Limit Theorem

The Central Limit Theorem states that given a distribution with a mean and variance , the sampling distribution of the
mean approaches a normal distribution with a mean and a variance /N as the sample size (noted N), increases.

The amazing and counter-intuitive thing about the central limit theorem is that no matter the shape of the original
distribution, the sampling distribution of the mean approaches a normal distribution. (Keep in mind that N is the sample
size for each mean and not the number of samples; remember in a sampling distribution the number of samples is
assumed to be infinite).

Example for N = 4, 4 scores were sampled from a uniform distribution (thus, not a normal distribution) 500 times and the
mean computed each time. The same method was followed with means of 7 scores for N = 7 and 10 scores for N = 10.

Note two things should be noted about the effect of increasing N (the sample size)

The distributions become more and more normal

The spread of the distributions decreases

The larger the sample size, the less likely it is that a sample mean will deviate greatly from the population mean.

Problem assume a test with a mean of 500 and a standard deviation of 100. What is the probability that the mean of
a sample of 5 people is greater than 580?

Solution it is necessary to know the distribution of the means of samples of 5 numbers. The mean of the sampling

distribution of the mean is (500 in this example) and the standard deviation is = 100/2.236 = 44.72. The sampling
distribution of the mean is shown below.

Since 580 is 80 points above the mean and the standard deviation is 44.72, 580 is 80/44.72 = 1.79 standard deviations
above the mean. Use a z-table to find out that only 0.04 of the area covers.
Estimators

When a parameter is being estimated, the estimate can be

a single number, and the estimate is called a "point estimate"

a range of scores, and the estimate is called an interval estimate. Confidence intervals are used for interval
estimates

Example of a point estimate assume you wanted to estimate the mean time it takes 12-year-olds to run 100 yards. The
mean running time of a random sample of 12-year-olds would be an estimate of the mean running time for all 12-year-olds.
Thus, the sample mean (M) would be a point estimate of the population mean ().

Estimator for variance

Remember that the variance for a population is = (X-)/N

The estimate for the variance is s = (X-M)/(N-1). Note the N-1 denominator, and not N.

Confidence intervals

Once the population is specified, the next step is to take a random sample from it. Indeed, the sample mean is
an unbiased estimate of , the population mean. But it will certainly not be a perfect estimate. For the estimate of to be
of value, one must have some idea of how precise it is. That is, how close to is the estimate likely to be?

Confidence interval for the mean (standard deviation of the population known)

Three values are used to construct a confidence interval for

the sample mean (M),

the value of z (which depends on the level of confidence),
and the standard error of the mean (M)

The formula for a confidence interval is

M - z M M + z M

Example say the SAT scores have a standard deviation of 100. Need to compute a 95% confidence interval for the mean
score, using a sample of 10 scores (which are 320, 380, 400, 420, 500, 520, 600, 660, 720, and 780).

Solution

sample mean: M = 530

confidence is 95%, so we need to contain 95% of the scores. Using a z-table, this shows we need to go 1.96 standard
deviations (in both directions). So z = 1.96

and the standard error of the mean: =

All the components of the confidence interval are now known: M = 530, M = 31.62, z = 1.96.
So lower limit = 530 - (1.96)(31.62) = 468.02, and upper limit = 530 + (1.96)(31.62) = 591.98
Confidence interval for the mean (standard deviation of the population not known)

When is known, the formula for the confidence interval is M - zM M + zM

When is not known, we need to estimate the M component. For that,

(N is the sample size).

Whenever the standard deviation is estimated, the t rather than the normal z distribution should be used. The values of t
are larger than the values of z, so confidence intervals when is estimated are wider than confidence intervals when is
known.

The value of t can be determined from a t table. The degrees of freedom for t is equal to the degrees of freedom for the
estimate of M which is equal to N-1.

The formula for the confidence interval therefore becomes: M - t sM M + t sM

General formula for confidence intervals

If a statistic is normally distributed, and the standard error of the statistic is known, then a confidence interval for that
statistic can be computed as follows: statistic (z) (stat), where stat is the standard error of the statistic. For example, the
confidence interval for the mean is M z M, where M is the sample mean and M is the standard error of the mean.

If the standard error has to be estimated then the formula uses t. For instance, the confidence interval for the mean
becomes M t sM.
Law of Large Numbers

According to the Law of Large Numbers (LLN), the average of the results obtained from a large number of trials should be
close to the expected value, and will tend to become closer as more trials are performed.

For example, a single roll of a fair, six-sided die produces one of the numbers 1, 2, 3, 4, 5, or 6, each with equal probability.
Therefore, the expected value of a single die roll is

According to the law of large numbers, if a large number of six-sided dice are rolled, the average of their values (called the
sample mean) is likely to be close to 3.5, with the precision increasing as more dice are rolled.

The weak law of large numbers

The weak law of large numbers (also called Khintchine's law) states that the sample average converges in
probability towards the expected value.

That is to say that for any positive number ,

The weak law of large numbers essentially states that for any nonzero margin specified, no matter how small, with a
sufficiently large sample there will be a very high probability that the average of the observations will be close to the
expected value; that is, within the margin.It is called the weak law because random variables may converge weakly (in
probability) as above without converging strongly (almost surely) as below.
The strong law of large numbers

The strong law of large numbers states that the sample average converges almost surely to the expected value.

That is,

This version is called the strong law because random variables which converge strongly (almost surely) are guaranteed to
converge weakly (in probability). The strong law implies the weak law but not vice versa, when the strong law conditions
hold the variable converges both strongly (almost surely) and weakly (in probability) . However the weak law may hold in
conditions where the strong law does not hold and then the convergence is only weak (in probability).

Differences between the weak law and the strong law

The weak law states that for a specified large n, the average is likely to be near . Thus, it leaves open the possibility
that happens an infinite number of times, although at infrequent intervals.

The strong law shows that this almost surely will not occur. In particular, it implies that with probability 1, we have that for
any > 0 the inequality holds for all large enough n.
Borel's law of large numbers

Borel's law of large numbers states that if an experiment is repeated a large number of times, independently under
identical conditions, then the proportion of times that any specified event occurs approximately equals the probability of
the event's occurrence on any particular trial; the larger the number of repetitions, the better the approximation tends to
be. More precisely, if E denotes the event in question, p its probability of occurrence, andNn(E) the number of
times E occurs in the first n trials, then with probability one,[18]

Chebyshev's inequality

Let X be a random variable with finite expected value and finite non-zero variance 2. Then for any real number k > 0,

This theorem makes rigorous the intuitive notion of probability as the long-run relative frequency of an event's occurrence.
It is a special case of any of several more general laws of large numbers in probability theory.
Hypothesis testing

The purpose of hypothesis testing is to test the viability of the null hypothesis in the light of experimental data.

Significance level ()

In hypothesis testing, the significance level is the criterion used for rejecting the null hypothesis.

The significance level () is used in hypothesis testing as follows

First, the difference between the results of the experiment and the null hypothesis is determined
Second, assuming the null hypothesis is true, the probability of a difference that large or larger is computed
Third, this probability is compared to the significance level
o If the probability is less than or equal to the significance level, then the null hypothesis is rejected and the
outcome is said to be statistically significant.
Traditionally, experimenters have used either the 0.05 level (sometimes called the 5% level) or the 0.01 level (1%
level). The lower the significance level, the more the data must diverge from the null hypothesis to be significant.

The null hypothesis

The null hypothesis is a hypothesis about a population parameter. The null hypothesis is typically a hypothesis of no
difference.

Example Consider a researcher interested in whether the time to respond to a tone is affected by the consumption of
alcohol. The null hypothesis is that 1 - 2 = 0, where 1 is the mean time to respond after consuming alcohol and 2 is the
mean time to respond otherwise. Thus, the null hypothesis concerns the parameter 1 - 2 and the null hypothesis is that
the parameter equals zero.

The symbol H0 is used to indicate the null hypothesis. In the example above: H0: 1 - 2 = 0

Steps in hypothesis testing

1) specify the null hypothesis (H0) and the alternative hypothesis (H1).
2) select a significance level. Typically the 0.05 or the 0.01 level is used.
3) calculate a statistic analogous to the parameter specified by the null hypothesis. For example: if the null hypothesis
were defined by the parameter 1- 2, then the statistic M1 - M2 would be computed.
4) calculate the probability value (often called the p value) meaning the probability of obtaining a statistic as different
or more different from the parameter specified in the null hypothesis as the statistic computed from the data. The
calculations are made assuming that the null hypothesis H0 is true. Note: the p-value is the probability of obtaining data
as extreme or more extreme than the current data (assuming H0 is true). It is not the probability of the null hypothesis
H0 itself. Thus, if the probability value is 0.005, this means that the probability of obtaining data as different or more
different from the null hypothesis as those obtained in the experiment is 0.005.
5) compare the p value with the significance level
if p value < significance level, then the null hypothesis is rejected; the outcome is said to be "statistically
significant".
else, the null hypothesis is not rejected; the outcome is said be "not statistically significant."
Example assume a population with a normal distribution standard deviation () known to be 100. The null hypothesis is
that = 500. Then, a random sample of size N = 50 subjects is obtained and the mean of their scores (M) is calculated to be
530. The statistic (M) differs from the parameter specified in the null hypothesis () by 30 points. What is the probability of
M differing from by 30 or more points?

Solution The sampling distribution of M is known to have a mean of and a standard error of

, i.e. ~14.

The sampling distribution, then, looks like this

The mean is 500 and each tick mark represents one standard deviation (14 points). The shaded area is the portion of the
distribution 30 or more points from (meaning at least 30/14.14 = 2.12 standard deviations away from ), so the
proportion of the area that is shaded is the probability of M differing from by 30 or more points. Using a z-table, the area
is 0.017 for M < 500 30, and another 0.017 for M > 500 + 30, for a total of 0.034. So the p-value is 0.034.

A null hypothesis is not accepted just because it is not rejected. For example, if the probability value were 0.15, then one
would not be ready to present one's case that the null hypothesis is false. More convincing data would be needed to do
that. However, there would be no basis to conclude that the null hypothesis is true. It may or may not be true, there just is
not strong enough evidence to reject it. Failing to reject the null hypothesis is comparable to a finding of not guilty.

Therefore, the answer lies in relaxing the claim a little and arguing not that a variable has no effect whatsoever but that it
has, at most, a negligible effect. This can be done by constructing a confidence interval around the parameter value.

Errors in significance testing

1) type I error a true null hypothesis can be incorrectly rejected the probability of a Type I error is designated by

2) type II error a false null hypothesis can fail to be rejected the probability of a Type II error is designated by

True State of the Null Hypothesis

Statistical Decision
H0 True H0 False

Reject H0 Type I error Correct

Do not Reject H0 Correct Type II error

The probability of a Type I error () is called the significance level and is set by the experimenter.

There is a tradeoff between Type I and Type II errors. The more an experimenter protects himself or herself against Type I
errors by choosing a low level, the greater the chance of a Type II error.

One-tailed and two-tailed tests

If the null hypothesis were: H0: - = 0, and the value of the statistic M1- M2 were +5, then the probability of M1- M2
differing from zero by five or more (in either direction) would be computed. In other words, the probability value would be
the probability that either M1- M2 5 or M1- M2 -5.

Assume that the figure shown below is the sampling distribution of M1- M2.

Therefore

the "two-tailed" probability/test is the probability/test computed considering differences in both directions
the "one-tailed" probability/test is the probability/test computed considering differences in one direction

In the example, the one-tailed probability would be the probability of obtaining a value of M1- M2 > 5, given that the
difference between population means is zero.

Therefore, it is easier to reject the null hypothesis with a one-tailed test than with a two-tailed test as long as the effect is
in the specified direction. One-tailed tests have lower Type II error rates. In this example, the one-tailed probability
(0.036) is below the conventional significance level of 0.05 whereas the two-tailed probability (0.072) is not. However, one-
tailed tests and two-tailed tests have the same Type I error rate.
Testing Pearsons correlation

The sampling distribution of Pearson's r is normal only if the population correlation () equals zero; it is skewed if is not
equal to 0.

Example A sample of size N = 100 employees rate their own level of job satisfaction. This measure of job satisfaction is
correlated with supervisors' ratings of performance. The question is whether there is a relationship between these two
measures in the population.

Solution

1) specify the null hypothesis and an alternative hypothesis. The null hypothesis is = 0; the alternative hypothesis is 0.

2) choose a significance level, say 0.05

3) compute Pearsons r for the sample given (0.27 in this case),

4) compute the probability value meaning the probability of obtaining a difference between and the value specified by
the null hypothesis (i.e. zero) as large or larger than the difference obtained in the experiment. This can be calculated using
the following formula

, in this example

Now, the degrees of freedom are N-2 where N is the sample size, in this case 100 2 = 98.

Having t = 2.776 and df = 98, and using a t-table, we determine the two-tailed probability value as 0.007.

5) since the probability value (0.007) is less than the significance level (0.05), the correlation is significant. The null
hypothesis is rejected. It is concluded that the correlation between job satisfaction and job performance is greater than
zero.
Power

Power is the probability of correctly rejecting a false null hypothesis.

Power is therefore defined as: 1 - where is the Type II error probability.

Factors affecting power

The size of the difference between population means the more the means differ from each other, the easier it is
to detect the difference.

The significance level chosen the more conservative (lower) the significance level, the lower the power. Thus,
using the 0.01 level will result in lower power than using the 0.05 level.

Increasing N, the sample size, decreases the denominator of the equation for z and increases
power

The larger the variance (), the lower the power. In the formula for z

Prediction

When there is a linear relationship between two variables, it is possible to predict a person's score on one variable from
their score on the second variable with better than chance accuracy.

The prediction problem is one of finding the straight line that best fits the data. Since the terms "regression" and
"prediction" are synonymous, this line is called the regression line.

Example the scatterplot tobelow shows the relationship between the Identical Blocks Test and the Wonderlic Test. As you
can see, the relationship is fairly strong: Pearson's correlation is 0.677.

The best fitting straight line is also shown. It has a slope of 0.481 and a Y intercept of 15.8468. The regression line can be
used for predicting.
The regression line

Y = bX + A where b = slope and A = Y intercept.

The formulas for b and A are

b = r * sy/sx and A = My b * Mx, where

r is the Pearson's correlation between X and Y

sx is the standard deviation of X
sy is the standard deviation of Y
Mx is the mean of X
My is the mean of Y

If the scores are standardized, meaning converted to z-scores, then the mean is 0 and standard deviation is 1.

In this case, b = Pearson's correlation and A = 0, so Y = r * X.

Standard error of prediction

The regression line seeks to minimize the sum of the squared errors of prediction. The square root of the average squared
error of prediction is used as a measure of the accuracy of prediction. This measure is called the standard error of the
estimate and is designated as est. The formula for the standard error of the estimate is:

Regression toward the mean

Example A person who scored 750 out of a possible 800 on the quantitative portion of the SAT takes the SAT again (a
different form of the test is used). Assuming the second test is the same difficulty as the first and that there was no learning
or practice effect, what score would you expect the person to get on the second test? The surprising answer is that the
person is more likely to score below 750 than above 750. This phenomenon is called regression to the mean.

Consider the ways in which someone could score 750. There are three possibilities:
(1) their "true" score is 750 and they had exactly average luck
(2) their "true" score is below 750 and they had better than average luck
(3) their "true" score is above 750 and they had worse than average luck.

Consider which is more likely, possibility #2 or possibility #3.

There are very few people with "true" scores above 750 (roughly 6 in 1,000).
There are many more people with true scores between 700 and 750 (roughly 17 in 1,000).

A person scoring 750 was, more likely than not, luckier than average. Since, by definition, luck does not hold from one
administration of the test to another, a person scoring 750 on one test is expected to score below 750 on a second test.
This does not mean that they necessarily will score less than 750, just that it is likely.
Chi Square

The Chi Square distribution is a mathematical distribution that is used directly or indirectly in many tests of significance.
The most common use of the chi square distribution is to test differences among proportions (the chi square test). The chi
square distribution has one parameter, its degrees of freedom (df). It has a positive skew; the skew is less with more
degrees of freedom. As the df increases, the chi square distribution approaches a normal distribution. The mean of a chi
square distribution is its df. The mode is df - 2 and the median is approximately df0.7.

BTW the mode is the value that appears most often in a set of data. The mode of a discrete probability distribution is the
value x at which its probability mass function takes its maximum value. In other words, it is the value that is most likely to
be sampled.

Distribution-free tests

Randomization tests

A randomization test

1) proceeds from the data actually collected

2) compares a computed statistic (e.g. the difference between means) with the value of that same statistic for other
arrangements of the data
3) the probability value is simply the proportion of arrangements leading to a value of the statistic as large or larger than
the value obtained from the actual data

Example suppose a researcher wished to know whether or not there were a relationship between two variables: X and Y.
The most common way to test the relationship would be using Pearson's r.

Solution

1) Pearson's correlation would be computed for the data as they stand, call it r.
2) the number of ways the X and Y numbers could be paired is calculated. The formula for the number of ways that the
numbers can be paired is simply: W = N!
3) Of these pairings, say only K would produce a higher correlation than r.
4) So the one-tailed probability is K / W (to be compared with the significance level)

Randomization tests have only one major drawback: they are impractical to compute with moderate to large sample sizes.

Rank randomization tests

Rank randomization tests are performed by first converting the scores to ranks and then computing a randomization test.
Sign tests

Suppose a researcher was interested in whether a drug helped people fall asleep. Subjects took the drug one night and a
placebo another night with the order counterbalanced. The number of minutes it took each of 8 subjects to fall asleep is
shown below.

Drug Placebo
12 21
9 16
11 8
21 36
17 28
22 20
18 29
11 22

If the drug has no effect, then the population proportion () of people falling asleep faster in the drug condition is 0.50.
Therefore, the null hypothesis is that = 0.50. Of the 8 subjects, 7 fell asleep faster with the drug.

Use the binomial probability for obtaining r successes in N trials is, which is

where P(r) is the probability of exactly r successes, N is the number of events, and is the probability of success on any one
trial. This formula for the binomial distribution assumes that the events.

In this case, P(7) + P(8) = 0.03125 + 0.00391 = 0.0352. The one-tailed probability value is therefore 0.03516. The two-tailed
probability value is 2 * 0.03516 = 0.0732.

Sampling

Sampling is concerned with the selection of an unbiased subset of individual observations within a population.

Sampling methods

simple random
systematic (e.g. every Kth member of the population)
cluster (population divided into clusters)
stratified (population divided by exclusive groups or strata, followed by sampling from each group)