Hypothesis Testing: Basic Concepts and Tests of Association, Chi-Square Tests

Basic concepts - Example

GEICO feels that consumers do not like the caveman ad campaign so it needs to be changed GEICO wants to verify this feeling so they survey a sample and find that the campaign is well liked. Should GEICO conclude that their feeling is wrong or that the sample mean is a function of chance?

Hypothesis Testing: Basic Concepts

Hypothesis: An assumption made about a population parameter (not sample statistic)
E.g. Consumers dislike the caveman ad campaign

Purpose of Hypothesis Testing: To make a judgment about the difference between the sample statistic and the population parameter
The sample likes the caveman campaign. Is this an accurate representation of the populations attitude?

The mechanism adopted to make this objective judgment is the core of hypothesis testing

Hypothesis testing: Logic

Is the sample statistic a function of chance or luck rather than an accurate representation of the population parameter? Example:
Hypothesized mean attitudes are 2 (on a 1(SD) 5(SL) scale) Observed mean attitudes are 4 (on a 1(SD) 5(SL) scale) Is the difference between the two a chance event or are we really wrong about our hypothesis? This is statistically evaluated.

Problem Definition Clearly state the null and alternative hypotheses. Choose the relevant test and the appropriate probability distribution Determine the significance level Compute relevant test statistic Choose the critical value Compare test statistic and critical value

Determine the degrees of freedom Decide if one-or two-tailed test No

Does the test statistic fall in the critical region?

Yes Reject null

Do not reject null

1. Formulate Null & Alternative hypotheses

Null hypothesis (Ho)
the hypothesis of no difference
between the population parameter and sample statistic

OR no relationship
Between two population parameters

A mirror-image of the alternative (research) hypothesis

Alternative hypothesis (Ha or H1) the hypothesis of differences or relationships in the population Example
Ho: Mean population attitudes = 2 Ha: Mean population attitudes are not = 2; OR Ho: Use of social media is not related to likelihood of response to online ads Ha: Use of social media is positively related to likelihood of response to online ads

2. Choose appropriate test and probability distribution Depends on whether we are

Comparing means (Z distribution if population standard deviation is known; t distribution if population standard deviation is not known) Comparing frequencies (chi-square distribution)

3. Determine significance level

The level at which we want to make a judgment about the population parameter (the null hypothesis) Generally 10%, 5%, 1% (corresponding to 90%, 95% and 99% confidence levels) in social sciences The level at which the critical test statistic is identified

4. Determine degrees of freedom

Number of bits of unconstrained data available to calculate a sample statistic E.g. for X bar, d.f. is = n; for s, d.f. is n-1, since 1 d.f. is lost due to the restriction that we need to calculate the mean first to calculate the standard deviation

5. Decide if it is a one / two tailed test

One Tailed test: If the Research Hypothesis is expressed directionally:
E.g. Head-On wants to test if consumers dislike their ad campaign (mean liking < 3; (1 (strongly dislike) 5 (strongly like) scale). Ho: Population mean attitudes are greater than or equal to 3.0

Ha: Population mean attitudes are less than 3.0

For confirmation of Ha look in the tail of the direction of the Research Hypothesis

5. Decide if it is a one / two tailed test

Two Tailed test: If the Research Hypothesis is expressed without direction
E.g. Head-On wants to test if consumers feel differently about their ad campaign than they felt a year ago. (mean liking = 4.5; (1 (strongly dislike) 5 (strongly like) scale). Ho: Population mean attitudes = 4.5

Ha: Population mean attitudes are not equal to 4.5

For confirmation of Ha look in the tails on both sides of the distribution

6. Find the critical test statistic

Critical z value requires knowledge of level of significance Critical t value requires knowledge of level of significance and degrees of freedom Critical chi-square requires knowledge of level of significance and degrees of freedom

7. Criteria for rejecting / not rejecting H0

Compute observed test statistic Compare critical test statistic with observed test statistic
If the absolute value of observed test statistic is greater than the critical test statistic, reject Ho
If the absolute value of observed test statistic is smaller than the critical test statistic then Ho cannot be rejected.

Regions of rejection / acceptance

Type 1 and Type 2 errors

Data Analysis conclusion is:
Reject Null hypothesis Do not reject Null hypothesis

Null hypothesis in population is

True Type 1 error Prob: alpha (Significance False Correct decision (Power of the

level)

test)

Correct decision (Confidence

Type 2 error Prob: beta

level)

(weakness of the test)

Type 1 and Type 2 errors

The lower the confidence level, the greater the risk of rejecting a true H0 Type 1 error (alpha) i.e. you increase the chances of accepting a false research hypothesis
i.e. if you reduce the confidence level from 95% to 90% the chances of you declaring that the effect observed in the sample actually prevails in the population, are higher. If the effect in reality does not exist in the population, then you commit a Type 1 error.

Therefore in Type 1 error you declare an effect which does not exist

Type 1 and Type 2 errors

The higher the confidence level the greater the risk of accepting a false H0 Type 2 error (beta), i.e. you reduce the chances of accepting a true research hypothesis
i.e. if you increase the confidence level from 95% to 99%, the chances that you miss the effect which may actually be there in the population, are higher. the power of the test to spot the effect is reduced Therefore power = 1 beta

Therefore in Type 2 error you miss an effect which exists

Hypothesis Testing Tests in this class

Frequency Distributions Means Means Means (one) (two) (more than two) Statistical Test 2 z (if is known)

t (if is unknown) t
ANOVA

Chi-Square as a test of independence

Statistical Independence: if knowledge of one does not influence the outcome of the other E.g. Affiliation to school (nominally scaled) does not influence decision to eat at the student union Expected Value: The average value in a cell if the sampling procedure is repeated many times Observed Value: The value in the cell in one sampling procedure Only nominal / categorical variables

Chi-square Step-by-Step
1) Formulate Hypotheses

Chi-Square As a Test of Independence

Null Hypothesis Ho
Two (nominally scaled) variables are statistically independent There is no relationship between school affiliation and decision to eat at the student union

Alternative Hypothesis Ha
The two variables are not independent School affiliation does influence the decision to eat at the student union

Chi-square As a Test of Independence (Contd.)

Chi-square Distribution
A probability distribution for categorical data Total area under the curve is 1.0

A different chi-square distribution is associated with different degrees of freedom

The chi-square distribution

F(x2)

df = 4

= .05 x2

Chi-square Step-by-Step
1) 2) 3) 4) 5) Formulate Hypotheses Calculate row and column totals Calculate row and column proportions Calculate expected frequencies (Ei) Calculate 2 statistic

Chi-square Statistic (2)

Measures of the difference between the actual numbers observed in cell i (Oi), and number expected (Ei) under independence if the null hypothesis were true

(Oi Ei ) i 1 Ei
2 n

With (r-1)*(c-1) degrees of freedom r = number of rows c = number of columns Expected frequency in each cell: Ei = pc * pr * n Where pc and pr are proportions for independent variables and n is the total number of observations

Chi-square Step-by-Step
1) 2) 3) 4) 5) 6) Formulate Hypotheses Calculate row and column totals Calculate row and column proportions Calculate expected frequencies (Ei) Calculate 2 statistic Calculate degrees of freedom

Chi-square As a Test of Independence (Contd.)

Degree of Freedom
v = (r - 1) * (c - 1)

r = number of rows in contingency table

c = number of columns

Chi-square Step-by-Step
1) 2) 3) 4) 5) 6) 7) Formulate Hypotheses Calculate row and column totals Calculate row and column proportions Calculate expected frequencies (Ei) Calculate 2 statistic Calculate degrees of freedom Obtain Critical Value from table

The chi-square distribution

F(x2) df = 4 Critical value = 9.49

5% of area under curve

= .05 x2 Ex: Significance level = .05 Degrees of freedom = 4 CVx2 = 9.49

Chi-square Step-by-Step
1) 2) 3) 4) 5) 6) 7) 8) Formulate Hypotheses Calculate row and column totals Calculate row and column proportions Calculate expected frequencies (Ei) Calculate 2 statistic Calculate degrees of freedom Obtain Critical Value from table Make decision regarding the Null-hypothesis

Example of Chi-square as a Test of Independence

Eat / Dont eat Y A 10 N 8

This is the observed value

School

B
C

20
45

16
18 This is a Cell

D
E

16
9

6
2

Chi-square example
School A B C D Eat at SU O1 = 10 E1 = 12 O3 = 20 E3 = 24 O5 = 45 E5 = 42 O7 = 16 E7 = 15

0.24 * 0.67 * 150 Total 18 36 63 22

36/150
Pr 0.12 0.24 0.42 0.15

Dont Eat O2 = 8 E2 = 6 O4 = 16 E4 = 12 O6 = 18 E6 = 21 O8 = 6 E8 = 7

F
Total Pc

O9 = 9 E9 = 7 100 0.67

O10 = 2 E10 = 4 50 0.33

11
150 1.00

0.07
1.00

Chi-square example
Observed chi-square = [(10 12)2 / 12] + [(8 6)2 / 6] + [(20 24)2 / 24] + + [(2 4)2 / 4] = 5.42 d.f. = (r-1)(c-1) = (5-1)(2-1) = 4 Critical chi-square at 5% level of significance at 4 degrees of freedom = 9.49 Since observed chi-square < critical chi-square (5.42 < 9.49), H0 cannot be rejected Hence decision to eat / not eat at the student union is statistically independent of their school affiliation. In other words there is no relationship between the decision to eat at the SU and the school they are in.

The chi-square distribution

F(x2) df = 4 Critical value = 9.49

5% of area under curve

= .05 x2

Ex: Significance level = .05 Degrees of freedom = 4 CVx2 = 9.49 The decision rule when testing hypotheses by means of chi-square distribution is: If x2 is <= CVx2, accept H0 Thus, for 4 df and = .05 If x2 is > CVx2, reject H0 If If x2 is <= 9.49, accept H0