Art Elaine B.

Morales 2 Management 1

TF 7:00-8:30 am Math 2

Z-Test A statistical test used to determine whether two population means are different when the variances are known and the sample size is large. The test statistic is assumed to have a normal distribution and nuisance parameters such as standard deviation should be known in order for an accurate z-test to be performed. A. Five steps in Hypothesis testing 1. Stating the research The first step is to state the research problem in terms of a question that identifies the population(s) of interest to the researcher, the parameter(s) of the variable under investigation, and the hypothesized value of the parameter(s). This step makes the researcher not only define what is to be tested but what variable will be used in sample data collection. The type of variable (or combination of variables as in relationship type research questions) whether categorical, discrete or continuous further defines the statistical test which can be performed on the collected data set. For example: Is the mean first salary of a newly graduated student equal to $30,000? The population of interest is all students who have just graduated. The parameter of interest is the mean and the variable salary is continuous. The hypothesized value of the parameter, the mean, is $30,000. Since the parameter is a population mean of a continuous variable variable, this suggests a one sample test of a mean. 2. Specify the null and alternative hypothesis The second step is to state the research question in terms of a null hypothesis (H0) and a alternative hypothesis (HA). The null hypothesis is the population parameter, = $30,000 (H0: = $30,000). The alternative hypothesis is the population parameter does not equal $30,000 ( HA: NE $30,000). This HA suggests a two-tailed test as NE $30,000 can be less

than $30,000 or more than $30,000. Sometimes the alternative hypothesis is stated in terms of a direction such as less than or greater than a value such at $30,000. A directional HA calls for a one-tailed test, in the direction stated in the HA. The next part of step 2 is to select a significance level (Type I error) typically alpha is used at the .05 or the .01 level. A good researcher will also not neglect Type II error. In this step we are not only setting up our research question in terms of statistical hypotheses, but we must evaluate whether all the assumptions appropriate for the statistical test have been met. Example: H0: = $30,000 HA: NE $30,000 alpha=.05 Test assumptions are 1) the population is normally distributed or sample size is approximately >=30 and 2) the sample we have used to collect the data was drawn randomly from the population. If these test assumptions have not been meet, then data collection should be reevaluated or continued under caution. 3. Calculate test statistic The third step is to calculate a statistic analogous to the parameter specified by the null hypothesis. If the null hypothesis is defined by the parameter , then the statistics computed on our data set would be the mean (xbar) and the standard deviation (s). A histogram of our sample data set gives us our best approximation of what we expect our population distribution to look like. Since the best estimate of is xbar, our sample mean, the test statistic is based on a distribution of sample means, the sampling distribution of the mean, xbar, with n, sample size, equal to the number of data values used to compute xbar. We have hypothesized from the research question the mean of this distribution and want to see if our sample mean is close to this value. To determine where our sample mean fits on this sampling distribution, we convert our sample mean, xbar, to a zscore. Thus the test statistic would be :

z = xbar- (hypothesized) standard error of xbar The standard error of xbar (point estimate) is s, the sample standard deviation, divided by square root of n, the sample size since the population standard deviation is unknown. Example: Suppose we randomly sampled 100 high school seniors and determined their salary of their first job. The sample mean salary, xbar, was $29,000 with a standard deviation of $6,000. Since sample size is >30, we don't have to worry about whether the population is normally distributed (Central Limit Theorem). The test statistic would be: z = $29,000 - $30,000 = -$1,000 = -1.667 $6,000/sqrt(100) $600 4. Compute probability of test statistic or rejection region The fourth step is to calculate the probability value (often called the pvalue) which is the probability of the test statistic for both tails since this this two-tailed test. The probability value computed in this step is compared with the significance level selected in step 2. If the probability is less than or equal to the significance level, then the null hypothesis is rejected. If the probability is greater than the significance level then the null hypothesis is not rejected. When the null hypothesis is rejected, the outcome is said to be "statistically significant"; when the null hypothesis is not rejected then the outcome is said be "not statistically significant." If the outcome is statistically significant, then the null hypothesis is rejected in favor of the alternative hypothesis. Example:

P(z> 1.667) =.048 + P(z< -1.667)=.048, the pvalue is .048+.048=.096 Since this value is greater than alpha=.05 selected when we set up out hypotheses, we accept the null hypothesis, H0: = $30,000.

If we wish to use a rejection region of alpha=.05 (.025 in each tail) to determine if we accept or reject the null hypothesis, the cut-off z-score would be -1.96 and 1.96. If our test statistic is >=1.96 or <= -1.96, then we would reject the null hypothesis at alpha=.05. We can say that our test statistic (transformed into a z-score) is in the rejection region. In this example, our test statistic, z=-1.667 for our test statistic does not fall in the rejection region (sometimes called the acceptance region), so we must accept the null hypothesis. 5. State conclusions The fifth and final step is to describe the results and state correct statistical conclusions in an understandable way. The conclusions consists of two statments-one describing the results of the null hypothesis and the other describing the results of the alternative hypothesis. The first statement should state as to whether we accepted or rejected the null hypothesis and for what value of alpha or p-value for our test statistic. The second statement should answer the research question proposed in step 1 stating the sample statistic collected which estimated the parameter we hypothesized. Example: Accept the null hypothesis at alpha=.05 or p-value of .096. Based on a sample mean of $25,000, the mean salary of a newly graduated student does not equal $30,000. B. Formula for Z-Test The z score is calculated from the distance of a value from the distribution center divided by the standard dev. (x-xbar)/st. dev C. When to use Z-Test Z test may be used to test hypothesis involving a single sample mean or two sample means. It makes use of the normal distributions. It may also used as a test for the difference between two proportions.

D. Alpha and Beta errors

Alpha Error or Type I This is the probability of rejecting a null hypothesis that is actually true. Beta Error or Type II This is the probability of failing to reject the null hypothesis that is actually false.