Business Statistics, 4e: by Ken Black

Business Statistics, 4e
by Ken Black
Chapter 12
Analysis of
Categorical Data
Discrete Distributions
Business Statistics, 4e, by Ken Black. 2003 John Wiley & Sons.
12-1
Learning Objectives
Understand the 2 goodness-of-fit test and how to
use it.
Analyze data using the 2 test of independence.
12-2
Page 1
2 Goodness-of-Fit Test
The 2 goodness-of-fit test compares
expected (theoretical) frequencies
of categories from a population distribution
to the observed (actual) frequencies
from a distribution to determine whether
there is a difference between what was
expected and what was observed.
12-3
2 Goodness-of-Fit Test
( f o f e)
=
2
df = k -1- c
where:
= frequencyof observedvalues
= frequencyof expectedvalues
k = numberof categories
c = numberof parametersestimatedfromthesampledata
12-4
Page 2
Month
January
February
March
April
May
June
July
August
September
October
November
December
Milk Sales Data

for Demonstration
Problem 12.1
Gallons
1,610
1,585
1,649
1,590
1,540
1,397
1,410
1,350
1,495
1,564
1,602
1,655
18,447
12-5
Hypotheses and Decision Rules

for Demonstration Problem 12.1
Ho : The monthly milk figures for milk sales
are uniformly distributed
Ha : The monthly milk figures for milk sales
are not uniformly distributed
=.01
df = k 1 c
= 12 1 0
= 11
2
.01,11
If
If
2
C al
2
C al
> 24 .725 , reject H o .

24 .725, do not reject H o .
= 24.725
12-6
Page 3
Calculations
Month
January
February
March
April
May
June
July
August
September
October
November
December
fo
fe
(fo - fe)2/fe
1,610 1,537.25
3.44
1,585 1,537.25
1.48
1,649 1,537.25
8.12
1,590 1,537.25
1.81
1,540 1,537.25
0.00
1,397 1,537.25
12.80
1,410 1,537.25
10.53
1,350 1,537.25
22.81
1,495 1,537.25
1.16
1,564 1,537.25
0.47
1,602 1,537.25
2.73
1,655 1,537.25
9.02
18,447 18,447.00
74.38
18447
12
=153725
.
=
e
2
Cal
= 74 .37
12-7
Demonstration Problem 12.1:

Conclusion
df = 11
0.01
Non Rejection
region
24.725
2
C al
= 74 .37 > 24 .725 , reject H o .
12-8
Page 4
Bank Customer Arrival Data

Number of
Arrivals
0
Observed
Frequencies
7
18
2
3
25
17
12
5
12-9
Hypotheses and Decision Rules

Ho: The frequency distribution is Poisson
Ha: The frequency distribution is not Poisson
=.05
df = k 1 c
= 6 1 1
If
If
2
Cal
2
Cal
> 9 .488 , reject H o.

9 .488 , do not reject H o.
=4
2
.05, 4
= 9.488
12-10
Page 5
Calculations
for Demonstration Problem 12.2:
Estimating the Mean Arrival Rate
Number of
Observed
Arrivals
Frequencies
X
f
0
7
1
18
2
25
3
17
4
12
5
5
=
fX
0
18
50
51
48
25
192
Mean
Arrival
Rate
192
84
= 2 .3 custom ers per m inute
=
12-11
Calculations for Demonstration Problem

12.2: Poisson Probabilities for = 2.3
Expected
Expected
Number of Probabilities Frequencies
Arrivals X
P(X)
nP(X)
0
0.1003
8.42
1
0.2306
19.37
2
0.2652
22.28
3
0.2033
17.08
4
0.1169
9.82
0.0838
7.04
5
n=f
= 84
Poisson
Poisson
Probabilities
Probabilities
for
for==2.3
2.3
12-12
Page 6
2 Calculations
(fo - fe)2
fe
Number of Observed
Expected
Arrivals Frequencies Frequencies
X
f
nP(X)
0
7
8.42
1
18
19.37
2
25
22.28
3
17
17.08
4
12
9.82
5
7.04
5
84
84.00
2
Cal
= 1.74
0.24
0.10
0.33
0.00
0.48
0.59
1.74
12-13
Demonstration Problem 12.2: Conclusion

df = 4
0.05
Non Rejection
region
9.488
2
Cal
= 1.74 9.488, do not reject Ho.
12-14
Page 7
Using a 2 Goodness-of-Fit Test

to Test a Population Proportion
=.05
Ho : P = .08
Ha : P .08
df = k 1 c
= 2 1 0
=1
2
.05,1
If
.
= 3841
If
2
Cal
2
Cal
> 3.841, reject H o.

3.841, do not reject H o.
12-15
Using a 2 Goodness-of-Fit Test to Test

a Population Proportion: Calculations
fo
33
167
200
Defects
Nondefects
n=
Defects
f
f
fe
16
184
200
(f f )
= o e
f
2
(3316) + (167184)
=
16
184
= 18.0625 + 1.5707
= 19.6332
= nP
= (200 )(. 08 )
= 16
Nondefects
f
f
= n (1 P )
= (200 )(. 92 )
= 184
12-16
Page 8
Using a 2
Goodness-ofFit Test
to Test a
Population
Proportion:
Conclusion
df = 1
0.05
Non Rejection
region
3.841
2
Cal
= 19.6332 > 3.841, reject Ho.
12-17
2 Test of Independence
Used to analyze the frequencies of two
variables with multiple categories to
determine whether the two variables
are independent.
Qualitative Variables
Nominal Data
12-18
Page 9
2 Test of Independence: Investment Example

In which region of the country do you reside?
A. Northeast B. Midwest C. South
D. West
Which type of financial investment are you most likely to
make today?
E. Stocks
F. Bonds
G. Treasury bills
Type of financial
Investment
Contingency Table
E
G
O13
A
Geographic B
C
Region
D
nE
nF
nA
nB
nC
nD
N
nG
12-19
2 Test of Independence: Investment Example

If A and F are independent,
P( A F) = P ( A ) P ( F )
P ( A) =
P( F ) =
n n
P( A F ) =
A
AF
= N P( A F )
n n
= N A F
N N
Type of Financial
Investment
Contingency Table
E
Geographic
Region
n n
A
B
C
D
nE
F
e12
nF
nG
nA
nB
nC
nD
N
12-20
Page 10
2 Test of Independence: Formulas

eij =
(n )(n )
i
N
where : i = the row
Expected
Frequencies
j = the columnn
ni =
nj =
the total of row i

the total of column j
N = the total of all fr equencies
Calculated 2
(Observed 2)
( f o f e)
=
fe
where : df = (r - 1)(c - 1)
r = the numberr of rows
c = the numberr of columns
12-21
2 Test of Independence: Gasoline

Preference Versus Income Category
=.01
df = ( r 1)( c 1)
= ( 4 1)( 3 1)
=6
If
If
2
.01, 6
= 16.812
2
Cal
2
Cal
r=4
c=3
Income
Less than $30,000
$30,000 to $49,999
$50,000 to $99,000
At least $100,000
> 16.812 , reject H o .

16.812 , do not reject H o .
Type of
Gasoline
Regular Premium
Extra
Premium
Ho : Type of gasoline is
independen t of income
Ha : Type of gasoline is not
independen t of income
12-22
Page 11
Gasoline Preference Versus Income

Category: Observed Frequencies
Type of
Gasoline
Income
Less than $30,000
$30,000 to $49,999
$50,000 to $99,000
At least $100,000
Regular Premium
85
16
102
27
36
22
15
23
238
88
Extra
Premium
6
13
15
25
59
107
142
73
63
385
12-23

Category: Expected Frequencies
e
e
ij
11
12
13
Type of
Gasoline
(n )(n )
=
j
(107 )(238 )
385
= 66.15
=
(107 )(88 )
385
24
.
46
=
=
(107 )(59 )
Income
Less than $30,000
$30,000 to $49,999
$50,000 to $99,000
At least $100,000
385
= 16.40
Extra
Regular Premium Premium
(66.15)
(24.46)
(16.40)
85
16
6
(87.78)
(32.46)
(21.76)
102
27
13
(45.13)
(16.69)
(11.19)
36
22
15
(38.95)
(14.40)
(9.65)
15
23
25
238
88
59
107
142
73
63
385
12-24
Page 12

Category: 2 Calculation
2
f f
= of e
(88 66.15) + (16 24.46)
=
2
66.15
24.46
(6 16.40) +
16.40
(102 87.78) + (27 32.46) + (13 21.76) +

87 .78
32.46
21.76
(36 4513
. ) + (22 16.69 ) + (15 1119
. )
45.13
16.69
(15 38.95) + (23 14.40)

38.95
1119
.
14.40
+
2
(25 9.65)
9.65
= 70.78
12-25

Category: Conclusion
df = 6
0.01
Non rejection
region
16.812
2
Cal
= 70.78 > 16.812, reject Ho.
12-26
Page 13

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Business Statistics, 4e

Milk Sales Data

Hypotheses and Decision Rules

> 24 .725 , reject H o .

Demonstration Problem 12.1:

= 74 .37 > 24 .725 , reject H o .

Bank Customer Arrival Data

Hypotheses and Decision Rules

> 9 .488 , reject H o.

Calculations for Demonstration Problem

Demonstration Problem 12.2: Conclusion

= 1.74 9.488, do not reject Ho.

Using a 2 Goodness-of-Fit Test

> 3.841, reject H o.

Using a 2 Goodness-of-Fit Test to Test

= 19.6332 > 3.841, reject Ho.

2 Test of Independence: Investment Example

2 Test of Independence: Investment Example

2 Test of Independence: Formulas

the total of row i

N = the total of all fr equencies

2 Test of Independence: Gasoline

> 16.812 , reject H o .

Gasoline Preference Versus Income

Gasoline Preference Versus Income

Gasoline Preference Versus Income

(102 87.78) + (27 32.46) + (13 21.76) +

(15 38.95) + (23 14.40)

Gasoline Preference Versus Income

= 70.78 > 16.812, reject Ho.

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