Testing of Hypothesis

Business Research Methods

Testing of Hypothesis
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Introduction
There are four interrelated components that
influence the conclusion
Sample size
Effect size or the salience of the treatment relative to the noise
in measurement
Alpha level or a significance level
Power or the odd that you will observe a treatment effect when
it occurs
Given values for any three of these components, it is
possible to compute the value of the fourth
Business Research Methods
Testing of Hypothesis
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Testing of Hypothesis
A statement of prediction is called hypothesis
We have two types of hypothesis
Null Hypothesis (H
0
)
Alternate Hypothesis (H
1
)
Null Hypothesis usually refers to the no difference or
no effect case
Usually in management research we expect that our
treatments and programs will make a difference
So, typically, our theory is described in the alternative
hypothesis
or significance level is chance you can take while
confidence level () is power behind your statement.
= 1 e.g. if one can take a chance of 5%for his statement;
it means he is 95% confident to his statement


Business Research Methods
Testing of Hypothesis
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Type I and Type II Error
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Testing of Hypothesis
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Two types of error can be expected when we accept
of reject the hypothesis
Type I Error:
When we reject the Null Hypothesis when it is true
Type II Error
When we accept the Null Hypothesis when it is false
Probability Distribution and Normal Distribution
in Testing of Hypothesis
Business Research Methods
Testing of Hypothesis
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Probability distribution is classified in two
Discrete
It allows to take only a limited number of values
Continuous
The variable under consideration is allowed to take any value
within a given range
A value of, x, from a normal distribution specified by
a mean m and a standard deviation s can be
converted to a corresponding value of z, in a
standard normal distribution with the
transformation z = X- /s
Testing of Hypothesis
Business Research Methods
Testing of Hypothesis
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Two Tail Test
One Tail Test
Hypothesis Testing of Proportion
Business Research Methods
Testing of Hypothesis
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In case of qualitative phenomena, we have data on
the basis of presence of absence of an attribute (s)
With such data the sampling distribution may take
the form of binomial probability distribution whose
mean would be equal to n*p and standard deviation
equal to npq
Means proportion of success = np
Standard deviation of the proportion of success = pq/n
Z = p q / s
Questions
Business Research Methods
Testing of Hypothesis
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A sample of 400 male students is found to have a mean height of
67.47 inches. Can it be reasonably regarded as a sample from a large
population with mean height 67.39 inches and standard deviation
1.30 inches? Test at 5% level of significance.

Raju restaurant near the railway station at Falna has been having
average sales of 500 tea cups per day. Because of the development
of bus stand nearby, it expects to increase its sales. During the first
12 days after the start of the bus stand, the daily sales were as
under:

550, 570, 490, 615, 505, 580, 570, 460, 600, 580, 530, 526

On the basis of this sample information, can one conclude that Raju
Restaurants sales have increased? Use 5% level of significance.
Business Research Methods
Testing of Hypothesis
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