Statistics for

Business and Economics

6th Edition

Chapter 11

Hypothesis Testing II

Statistics for Business and Economics, 6e 2007 Pearson Education, Inc. Chap 11-1
 Chapter Goals
After completing this chapter, you should be able to:
Test hypotheses for the difference between two population means
Two means, matched pairs
Independent populations, population variances known
Independent populations, population variances unknown but
equal
Complete a hypothesis test for the difference between two
proportions (large samples)
Use the chi-square distribution for tests of the variance of a normal
distribution
Use the F table to find critical F values
Statistics for Business and
Complete an F test for the equality of two variances
Economics, 6e 2007 Pearson
Education, Inc. Chap 11-2
 Two Sample Tests

Two Sample Tests

Population Population
Means, Means, Population Population
Matched Independent Proportions Variances
Pairs Samples

Examples:
Same group Group 1 vs. Proportion 1 vs. Variance 1 vs.
before vs. after independent Proportion 2 Variance 2
treatment for
Statistics Group 2and
Business
Economics, 6e 2007 Pearson
(Note similarities to Chapter 9)
Education, Inc. Chap 11-3
 Matched Pairs
Tests Means of 2 Related Populations
Matched Paired or matched samples
Pairs Repeated measures (before/after)
Use difference between paired values:

di = xi - yi

Assumptions:
Both Populations Are Normally Distributed

Statistics for Business and

Economics, 6e 2007 Pearson
Education, Inc. Chap 11-4
 Test Statistic: Matched Pairs
The test statistic for the mean
Matched difference is a t value, with
Pairs n 1 degrees of freedom:

d D0
t
sd
n
Where
D0 = hypothesized mean difference
Statistics for Business and
sd = sample standard dev. of differences
Economics, 6e 2007 nPearson
= the sample size (number of pairs)
Education, Inc. Chap 11-5
 Decision Rules: Matched Pairs
Paired Samples
Lower-tail test: Upper-tail test: Two-tail test:
H0: x y 0 H0: x y 0 H0: x y = 0
H1: x y < 0 H1: x y > 0 H1: x y 0

/2 /2

-t t -t/2 t/2
Reject H0 if t < -tn-1, Reject H0 if t > tn-1, Reject H0 if t < -tn-1 ,
or t > tn-1 ,
Statistics for Businesst and
dD 0

has n - 1 d.f.
Economics, 6eWhere
s
2007 Pearson
n
d

Education, Inc. Chap 11-6

 Matched Pairs Example
Assume you send your salespeople to a customer
service training workshop. Has the training made a
difference in the number of complaints? You collect
the following data:
di
Number of Complaints: (2) - (1) d = n
Salesperson Before (1) After (2) Difference, di
= - 4.2
C.B. 6 4 - 2
T.F. 20 6 -14
M.H. 3 2 - 1 Sd
i
(d d) 2

R.K. 0 0 0 n 1
M.O. 4 0 - 4
Statistics for Business and -21 5.67
Economics, 6e 2007 Pearson
Education, Inc. Chap 11-7
 Matched Pairs: Solution
Has the training made a difference in the number of
complaints (at the = 0.01 level)?
Reject Reject
H0: x y = 0
H1: x y 0 /2
/2
= .01 d = - 4.2 - 4.604 4.604
- 1.66
Critical Value = 4.604
d.f. = n - 1 = 4 Decision: Do not reject H0
Test Statistic: (t stat is not in the reject region)
Conclusion: There is not a
d Dfor
Statistics 4.2 0 and
0 Business
t 1.66 significant change in the
sd / n 6e5.67/
Economics, 2007 5 Pearson number of complaints.
Education, Inc. Chap 11-8
 Difference Between Two Means

Population means, Goal: Form a confidence interval

independent for the difference between two
samples population means, x y
Different data sources
Unrelated

Independent

Sample selected from one population has no effect on the

sample selected from the other population

Statistics for Business and

Economics, 6e 2007 Pearson
Education, Inc. Chap 11-9
 Difference Between Two Means
(continued)

Population means,
independent
samples

x2 and y2 known Test statistic is a z value

x2 and y2 unknown

x2 and y2
assumed equal Test statistic is a a value from the
Statistics for Business
2 2
and Students t distribution
x and y
Economics, 6e 2007 Pearson
assumed unequal
Education, Inc. Chap 11-10
 x2 and y2 Known

Population means, Assumptions:

independent
samples Samples are randomly and
independently drawn
x2 and y2 known
* both population distributions
x2 and y2 unknown are normal

Population variances are

known
Statistics for Business and
Economics, 6e 2007 Pearson
Education, Inc. Chap 11-11
 x2 and y2 Known
(continued)

When x2 and y2 are known and

Population means,
independent both populations are normal, the
samples variance of X Y is
2 2
x y
2X Y
x2 and y2 known
* nx ny

x2 and y2 unknown and the random variable

(x y) (X Y )
Z
2
2x y

nX nY
Statistics for Business and
Economics, 6e 2007 Pearson
has a standard normal distribution
Education, Inc. Chap 11-12
 Test Statistic,
x2 and y2 Known

Population means,
independent The test statistic for
samples x y is:

x2 and y2 known
* z
x y D0
2 2
x2 and y2 unknown x y

nx ny
Statistics for Business and
Economics, 6e 2007 Pearson
Education, Inc. Chap 11-13
 Hypothesis Tests for
Two Population Means
Two Population Means, Independent Samples

Lower-tail test: Upper-tail test: Two-tail test:

H0: x y H0: x y H0: x = y

H1: x < y H1: x > y H1: x y
i.e., i.e., i.e.,
H0: x y 0 H0: x y 0 H0: x y = 0
H1: x y < 0 H1: x y > 0 H1: x y 0
Statistics for Business and
Economics, 6e 2007 Pearson
Education, Inc. Chap 11-14
 Decision Rules
Two Population Means, Independent Samples,
Variances Known
Lower-tail test: Upper-tail test: Two-tail test:
H0: x y 0 H0: x y 0 H0: x y = 0
H1: x y < 0 H1: x y > 0 H1: x y 0

/2 /2

-z z -z/2 z/2
Statistics
Reject H0for
if zBusiness
< -z and
Reject H0 if z > z Reject H0 if z < -z/2
Economics, 6e 2007 Pearson or z > z/2

Education, Inc. Chap 11-15

 x2 and y2 Unknown,
Assumed Equal

Population means, Assumptions:

independent Samples are randomly and
samples
independently drawn

x2 and y2 known Populations are normally

distributed
x2 and y2 unknown
Population variances are
x2 and y2
assumed equal
Statistics for Business
*
and
unknown but assumed equal

2 2
x and y
Economics, 6e 2007 Pearson
assumed unequal
Education, Inc. Chap 11-16
 x2 and y2 Unknown,
Assumed Equal
(continued)

Population means, Forming interval

independent estimates:
samples
The population variances
x2 and y2 known are assumed equal, so use
the two sample standard
deviations and pool them to
x2 and y2 unknown
estimate
x2 and y2
assumed equal
Statistics for Business
*
and
use a t value with
(nx + ny 2) degrees of
x2 and y2
Economics, 6e 2007 Pearson freedom
assumed unequal
Education, Inc. Chap 11-17
 Test Statistic,
x2 and y2 Unknown, Equal

x2 and y2 unknown The test statistic for

x y is:
x2 and y2
assumed equal * x y x y
x2 and y2 t
assumed unequal 1 1
S
2
n n
p
x y

Where t has (n1 + n2 2) d.f.,

and
Statistics for Business and (nx 1)s2x (ny 1)s2y
sp2
Economics, 6e 2007 Pearson nx ny 2
Education, Inc. Chap 11-18
 x2 and y2 Unknown,
Assumed Unequal

Population means, Assumptions:

independent Samples are randomly and
samples
independently drawn

x2 and y2 known Populations are normally

distributed
x2 and y2 unknown
Population variances are
x2 and y2 unknown and assumed
assumed equal unequal
Statistics for Business and
*
2 2
x and y
Economics, 6e 2007 Pearson
assumed unequal
Education, Inc. Chap 11-19
 x2 and y2 Unknown,
Assumed Unequal
(continued)

Forming interval estimates:

Population means,
independent
The population variances are
samples
assumed unequal, so a pooled
variance is not appropriate
x2 and y2 known
use a t value with degrees
x2 and y2 unknown of freedom, where
2
s 2x s 2y
x2 and y2 ( ) ( )
assumed equal n x n y
v 2
Statistics for Business and sx
2
2
s 2

x2 and y2
assumed unequal
Education, Inc.
*
Economics, 6e 2007 Pearson /(nx 1) y /(ny 1)
n x
n
y
Chap 11-20
 Test Statistic,
x2 and y2 Unknown, Unequal

x2 and y2 unknown The test statistic for

x y is:
x2 and y2
assumed equal (x y) D0
t
x2 and y2
assumed unequal * 2 2
y
x
nX nY
2
s2x s2y
( ) ( )
Statistics for Business and v n x n y
Where t has degrees of freedom: 2
s2
2

Economics, 6e 2007 Pearson s2x

/(nx 1) y /(ny 1)
n
nx y
Education, Inc. Chap 11-21
 Decision Rules
Two Population Means, Independent Samples,
Variances Unknown
Lower-tail test: Upper-tail test: Two-tail test:
H0: x y 0 H0: x y 0 H0: x y = 0
H1: x y < 0 H1: x y > 0 H1: x y 0

/2 /2

-t t -t/2 t/2
Reject H0 if t < -tn-1, Reject H0 if t > tn-1, Reject H0 if t < -tn-1 ,
Statistics for Business and or t > tn-1 ,
Economics, 6e 2007 Pearson
Where t has n - 1 d.f.
Education, Inc. Chap 11-22
 Pooled Variance t Test: Example
You are a financial analyst for a brokerage firm. Is there
a difference in dividend yield between stocks listed on the
NYSE & NASDAQ? You collect the following data:
NYSE NASDAQ
Number 21 25
Sample mean 3.27 2.53
Sample std dev 1.30 1.16

Assuming both populations are

approximately normal with
equal variances, is
Statistics
there afor
difference
Businessinand
average
Economics,
yield ( =6e0.05)?
2007 Pearson
Education, Inc. Chap 11-23
 Calculating the Test Statistic
The test statistic is:

t
X 1
X 2 1 2

3.27 2.53 0 2.040
1 1 1 1
S
2
p
1.5021
n1 n2 21 25

S2 1
n 1 S1
2
n 2 1 S 2
2

21 11.30 2
25 11.16 2
1.5021
p
(n1 1) (n2 1) (21 - 1) (25 1)
Statistics for Business and
Economics, 6e 2007 Pearson
Education, Inc. Chap 11-24
 Solution
Reject H0 Reject H0
H0: 1 - 2 = 0 i.e. (1 = 2)
H1: 1 - 2 0 i.e. (1 2)
.025 .025
= 0.05
df = 21 + 25 - 2 = 44 -2.0154 0 2.0154 t
Critical Values: t = 2.0154
2.040
Test Statistic: Decision:
3.27 2.53 Reject H0 at = 0.05
t 2.040
1 1
1.5021 Conclusion:
21 25 There is evidence of a
Statistics for Business and
Economics, 6e 2007 Pearson difference in means.
Education, Inc. Chap 11-25
 Two Population Proportions
Goal: Test hypotheses for the
Population difference between two population
proportions proportions, Px Py

Assumptions:
Both sample sizes are large,
nP(1 P) > 9

Statistics for Business and

Economics, 6e 2007 Pearson
Education, Inc. Chap 11-26
 Two Population Proportions
(continued)

The random variable

Population
proportions
(p x p y ) (p x p y )
Z
p x (1 p x ) p y (1 p y )

nx ny

is approximately normally distributed

Statistics for Business and
Economics, 6e 2007 Pearson
Education, Inc. Chap 11-27
 Test Statistic for
Two Population Proportions
The test statistic for
Population H0: Px Py = 0
proportions
is a z value:

z
p x p y
p 0 (1 p 0 ) p 0 (1 p 0 )

nx ny

n xp x n yp y
Statistics for Business and Where p 0
Economics, 6e 2007 Pearson nx ny
Education, Inc. Chap 11-28
 Decision Rules: Proportions
Population proportions
Lower-tail test: Upper-tail test: Two-tail test:
H0: px py 0 H0: px py 0 H0: px py = 0
H1: px py < 0 H1: px py > 0 H1: px py 0

/2 /2

-z z -z/2 z/2
Reject H0 if z < -z Reject H0 if z > z Reject H0 if z < -z
Statistics for Business and or z > z
Economics, 6e 2007 Pearson
Education, Inc. Chap 11-29
 Example:
Two Population Proportions
Is there a significant difference between the
proportion of men and the proportion of
women who will vote Yes on Proposition A?

In a random sample, 36 of 72 men and 31 of

50 women indicated they would vote Yes

Test at the .05 level of significance

Statistics for Business and
Economics, 6e 2007 Pearson
Education, Inc. Chap 11-30
 Example:
Two Population Proportions
(continued)
The hypothesis test is:
H0: PM PW = 0 (the two proportions are equal)
H1: PM PW 0 (there is a significant difference between
proportions)
The sample proportions are:
Men: pM = 36/72 = .50
Women: p=W31/50 = .62
The estimate for the common overall proportion is:
n xp x n yp y
72(36/72) 50(31/50) 67
p0 .549
n x n y and
Statistics for Business 72 50 122
Economics, 6e 2007 Pearson
Education, Inc. Chap 11-31
 Example:
Two Population Proportions
(continued)
Reject H0 Reject H0

The test statistic for PM PW = 0 is:

.025 .025
z
p M p W
p 0 (1 p 0 ) p 0 (1 p 0 )
-1.96 1.96
n1 n2
-1.31

.50 .62
.549 (1 .549) .549 (1 .549) Decision: Do not reject H0

72 50 Conclusion: There is not

1.31 significant evidence of a

Statistics for Business and
Critical Values = 1.96
Economics,For6e 2007 Pearson
= .05
Education, Inc.
difference between men
and women in proportions
who will vote yes.
Chap 11-32
 Hypothesis Tests of
one Population Variance

Goal: Test hypotheses about the

Population
Variance population variance, 2
If the population is normally distributed,

(n 1)s 2
2
n 1
2
follows a chi-square distribution with
(n 1) degrees of freedom
Statistics for Business and
Economics, 6e 2007 Pearson
Education, Inc. Chap 11-33
 Confidence Intervals for the
Population Variance
(continued)

The test statistic for

Population hypothesis tests about one
Variance
population variance is

(n 1)s 2
2
n 1
02

Statistics for Business and

Economics, 6e 2007 Pearson
Education, Inc. Chap 11-34
 Decision Rules: Variance
Population variance
Lower-tail test: Upper-tail test: Two-tail test:
H0: 2 02 H0: 2 02 H0: 2 = 02
H1: 2 < 02 H1: 2 > 02 H1: 2 02

/2 /2

n21,1 n21, n21,1 / 2 n21, / 2

Reject H0 if Reject H0 if Reject H0 if

Statistics
n21 for
2 Business and n21 n21, n21 n21, / 2
n 1,1
Economics, 6e 2007 Pearson or n21 n21,1 / 2
Education, Inc. Chap 11-35
 Hypothesis Tests for Two Variances

Tests for Two Goal: Test hypotheses about two

Population population variances
Variances H0: x2 y2 Lower-tail test
H1: x2 < y2
F test statistic
H0: x2 y2 Upper-tail test
H1: x2 > y2

H0: x2 = y2
Two-tail test
H1: x2 y2
Statistics for Business and
The two populations are assumed to be
Economics, 6e 2007 Pearson
independent and normally distributed
Education, Inc. Chap 11-36
 Hypothesis Tests for Two Variances
(continued)

The random variable

Tests for Two
2 2
Population s /
Variances F x
2
x
2
s / y y
F test statistic
Has an F distribution with (nx 1)
numerator degrees of freedom and (ny
1) denominator degrees of freedom

Statistics for Denote value with 1 numerator and 2

an Fand
Business
Economics, 6e 2007 Pearson
denominator degrees of freedom by
Education, Inc. Chap 11-37
 Test Statistic

Tests for Two The critical value for a hypothesis test

Population about two population variances is
Variances
2
s
F test statistic
F x
2
s y

where F has (nx 1) numerator

degrees of freedom and (ny 1)
denominator degrees of freedom
Statistics for Business and
Economics, 6e 2007 Pearson
Education, Inc. Chap 11-38
 Decision Rules: Two Variances
Use sx2 to denote the larger variance. H0: x2 = y2
H0: x2 y2 H1: x2 y2
H1: x2 > y2
/2

0 0 F
Do not
reject H0
Reject H0 F Do not
reject H0
Reject H0
Fnx 1,ny 1, / 2
Fn x 1,ny 1,

Reject H0 if F Fn x 1,ny 1, rejection region for a two-

tail test is:
Reject H0 if F Fnx 1,n y 1, / 2
Statistics for Business and
where sx2 is the larger of the
Economics, 6e 2007 Pearson
two sample variances
Education, Inc. Chap 11-39
 Example: F Test

You are a financial analyst for a brokerage firm. You

want to compare dividend yields between stocks listed on
the NYSE & NASDAQ. You collect the following data :
NYSE NASDAQ
Number 21 25
Mean 3.27 2.53
Std dev 1.30 1.16

Is there a difference in the variances between the

NYSE & NASDAQ at the = 0.10 level?
Statistics for Business and
Economics, 6e 2007 Pearson
Education, Inc. Chap 11-40
 F Test: Example Solution
Form the hypothesis test:
H0: x2 = y2 (there is no difference between variances)
H1: x2 y2 (there is a difference between variances)
Find the F critical values for = .
10/2:
Degrees of Freedom:
Fn x 1, ny 1, / 2
Numerator

(NYSE has the larger

standard deviation): F20 , 24 , 0.10/2 2.03
nx 1 = 21 1 = 20 d.f.
Denominator:
Statistics for Business and
Economics, y 6e 2007 Pearson
n 1 = 25 1 = 24 d.f.

Education, Inc. Chap 11-41

 F Test: Example Solution
(continued)

The test statistic is: H0: x2 = y2

H1: x2 y2
s2x 1.30 2
F 2 2
1.256
s y 1.16 /2 = .05

Do not
F
Reject H0
reject H0
F = 1.256 is not in the
rejection region, so we do not F20 , 24 , 0.10/2 2.03
reject H0
Conclusion: There is not sufficient evidence

Statistics for Business

of a difference and
in variances at = .10
Economics, 6e 2007 Pearson
Education, Inc. Chap 11-42
 Two-Sample Tests in EXCEL

For paired samples (t test):

Tools | data analysis | t-test: paired two sample for means

For independent samples:

Independent sample Z test with variances known:
Tools | data analysis | z-test: two sample for means

For variances
F test for two variances:
Tools | data analysis | F-test: two sample for variances
Statistics for Business and
Economics, 6e 2007 Pearson
Education, Inc. Chap 11-43
 Two-Sample Tests in PHStat

Statistics for Business and

Economics, 6e 2007 Pearson
Education, Inc. Chap 11-44
 Sample PHStat Output

Input

Output

Statistics for Business and

Economics, 6e 2007 Pearson
Education, Inc. Chap 11-45
 Sample PHStat Output
(continued)

Input

Output

Statistics for Business and

Economics, 6e 2007 Pearson
Education, Inc. Chap 11-46
 Chapter Summary
Compared two dependent samples (paired
samples)
Performed paired sample t test for the mean
difference
Compared two independent samples
Performed z test for the differences in two means
Performed pooled variance t test for the differences
in two means
Compared two population proportions
Statistics for Business
Performed andfor two population proportions
z-test
Economics, 6e 2007 Pearson
Education, Inc. Chap 11-47
 Chapter Summary
(continued)

Used the chi-square test for a single population

variance
Performed F tests for the difference between
two population variances
Used the F table to find F critical values

Statistics for Business and

Economics, 6e 2007 Pearson
Education, Inc. Chap 11-48