Basics of Hypothesis Testing: Understanding Significance Levels and Errors

1. Sections 7-1 and 7-2 Overview Basics of Hypothesis Testing

2. HYPOTHESIS TESTING In statistics, a hypothesis is a claim or statement about a property of a population. A hypothesis test (or test of significance) is a standard procedure for testing a claim about a property of a population.

3. RARE EVENT RULE This chapter, as the last chapter, relies on the Rare Event Rule for Inferential Statistics. If, under a given assumption, the probability of a particular observed event is exceptionally small, we conclude that the assumption is probably not correct.

4. OBJECTIVES FOR SECTION 7-2 • Given a claim, identify the null hypothesis and the alternative hypothesis, and express both in symbolic form. • Given a claim and sample data, calculate the value of the test statistic. • Given a significance level, identify the critical value(s). • Given the value of the test statistic, identify the P-value. • State the conclusion of a hypothesis test in simple, nontechnical terms. • Identify type I and type II errors that could be made when testing a given claim.

5. NULL HYPOTHESIS The null hypothesis (denoted by H0) is a statement that the value of a population parameter (such as proportion or mean) is equal to some claimed value. Here are some examples: H0: p = 0.3 H0: μ = 63.6 We test the null hypothesis directly in the sense that we assume it is true and reach a conclusion to either reject H0 or fail to reject H0.

6. ALTERNATIVE HYPOTHESIS The alternative hypothesis (denoted by H1 or Ha) is the statement that the parameter has a value that somehow differs from the null hypothesis. For the methods of this chapter, the symbolic form of the alternative hypothesis must use one of these symbols: < or > or ≠. For example:

7. NOTE ABOUT IDENTIFYINGH0 AND H1 Start Identify the specific claim or hypothesis to be tested and express it in symbolic form. Give the symbolic form that must be true when the original claim is false. Of the two symbolic expressions obtained so far, let the alternative hypothesis H1 be the one not containing equality, so that H1 uses the symbol < or > or ≠. Let the null hypothesis H0 be the symbolic expression that the parameter equals a fixed value.

8. NOTE ABOUT FORMING YOUR OWN CLAIMS If you are conducting a study and want to use a hypothesis test to support your claim, the claim must be worded so that it becomes the alternative hypothesis. For example, if you want to support the claim that your IQ improvement course raises the IQ mean above 100, you must state the claim as μ > 100. So, the null hypothesis is H0: μ = 100 and the alternative hypothesis is H1: μ > 100.

9. TEST STATISTIC The test statistic is a value computed from the sample data, and it is used in making the decision about the rejection of the null hypothesis. Test statistic for proportion Test statistic for mean

10. CRITICAL REGION The critical region (or rejection region) is the set of all values of the test statistic that cause us to reject the null hypothesis. For example, see the red shaded region in the graph.

11. SIGNIFICANCE LEVEL The significance level (denoted by α) is the probability that the test statistic will fall in the critical region when the null hypothesis is actually true. The is the same α introduced in Section 6-2 with the confidence level.

12. CRITICAL VALUE The critical value is any value that separates the critical region from the values of the test statistic that do not lead to rejection of the null hypothesis.

13. TWO-TAILED TEST Two-tailed test: The critical region is in the two extreme regions (tails) under the curve.Corresponds to H1: ≠ The area αis divided equally between the two tails of the critical region

14. LEFT-TAILED TEST Left-tailed test: The critical region is in the extreme left region (tail) under the curve. Corresponds to H1: < The area α is entirely in the left tail.

15. RIGHT-TAILED TEST Right-tailed test: The critical region is in the extreme right region (tail) under the curve. Corresponds to H1: > The area α is entirely in the right tail.

16. P-VALUE The P-value (or p-value or probability value) is the probability of a getting a value of the test statistic that is at least as extremeas the one representing the sample data, assuming the null hypothesis is true. The null hypothesis is rejected if the P-value is very small, such as 0.05 or less. P-values can be found by using the procedure in the flowchart on the next slide.

18. CONCLUSIONS Our initial conclusion will always be one of the following: 1. Reject the null hypothesis. 2. Fail to reject the null hypothesis.

19. DECISION CRITERION

20. WORDING THE FINAL CONCLUSION

21. TYPE I ERROR A type I error is the mistake of rejecting the null hypothesis when it is actually true. The symbol α is used to represent the probability of a type I error.

22. TYPE II ERROR A type II error is the mistake of failing to reject the null hypothesis when it is actually false. The symbol β is used to represent the probability of a type II error.

23. True state of nature Decision

24. CONTROLLING TYPE I AND TYPE II ERRORS • For any fixed α, an increase in the sample size n will cause a decrease in β. • For any fixed sample size n, a decrease in α will cause an increase in β. Conversely, an increase in α will cause a decrease in β. • To decrease both α and β, increase the sample size.

25. COMPREHENSIVE HYPOTHESIS TEST (TRADITIONAL METHOD)

26. COMPREHENSIVE HYPOTHESIS TEST (P­VALUE METHOD)