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Quantitative Methods Sessions 11 - 21

Estimation theory deals with estimating population parameters based on sample data. There are two types of estimators: point estimators and interval estimators. A point estimator provides a single value estimate, while an interval estimator provides a range of values within which the population parameter is expected to lie. Interval estimators are assessed based on their accuracy (confidence level) and precision (margin of error). Hypothesis testing involves forming a null hypothesis based on the current understanding and an alternative hypothesis, collecting data, and examining if the data provides enough evidence to reject the null hypothesis in favor of the alternative. The level of significance determines how improbable a sample result must be to reject the null hypothesis. Hypothesis tests can be one-tailed or two-

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0% found this document useful (0 votes)
77 views41 pages

Quantitative Methods Sessions 11 - 21

Estimation theory deals with estimating population parameters based on sample data. There are two types of estimators: point estimators and interval estimators. A point estimator provides a single value estimate, while an interval estimator provides a range of values within which the population parameter is expected to lie. Interval estimators are assessed based on their accuracy (confidence level) and precision (margin of error). Hypothesis testing involves forming a null hypothesis based on the current understanding and an alternative hypothesis, collecting data, and examining if the data provides enough evidence to reject the null hypothesis in favor of the alternative. The level of significance determines how improbable a sample result must be to reject the null hypothesis. Hypothesis tests can be one-tailed or two-

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Session No.

11: Estimation

Estimation Theory:
Estimation theory is a branch of statistics that deals with estimating the values of parameters based on measured/empirical data
that has a random component. An estimate is a single value that is calculated based on samples and used to estimate a
population value An estimator is a function that maps the sample space to a set of estimates. The entire purpose of estimation
theory is to arrive at an estimator, which takes the sample as input and produces an estimate of the parameters with the
corresponding accuracy

Two types of Estimation:

There are two types of estimators Point estimator Interval estimator

Point Estimator:

A point estimator is a statistic (that is, a function of the data) that is used to infer the value of an unknown parameter in a
statistical model. A point estimate is one of the possible values a pointer estimator can assume. Mathematically, suppose there
is a fixed parameter θ that needs to be estimated and X is a random variable corresponding to the observed data. Then an
estimator of θ, usually denoted by the symbol θb, is a function of the random variable X, and hence itself a random variable
θb(X). A point estimate for a particular observed dataset (i.e. for X = x) is then θb(x), which is a fixed value.

Assesing Point Estimator:

A point estimator is a statistic (that is, a function of the data) that is used to infer the value of an unknown parameter in a
statistical model. A point estimate is one of the possible values a pointer estimator can assume. Mathematically, suppose there
is a fixed parameter θ that needs to be estimated and X is a random variable corresponding to the observed data. Then an
estimator of θ, usually denoted by the symbol θb, is a function of the random variable X, and hence itself a random variable
θb(X). A point estimate for a particular observed dataset (i.e. for X = x) is then θb(x), which is a fixed value.

Interval Estimator:

An interval estimator of a population parameter under random sampling consists of two random variables, which are called the
upper and lower limits of the interval estimator, whose values decide intervals which expect to contain the parameter
estimated. Interval estimates are the all the ranges an interval estimator can assume. Each interval estimate states an range
within which a population parameter probably lies. An interval estimator can be assessed through Accuracy (confidence level)
Precision (margin of error)

Accuracy:

Accuracy is also called the confidence level of the estimator, and it is defined to be the probability that an interval estimator
obtained will contain the value of the population parameter. Any possible outcome of an interval estimator is called an interval
estimate. An interval estimate with confidence level (1 − α) is called an (1 − α)-confidence interval. The upper and lower
limits of a confidence interval are called the upper and lower limits, respectively.

Precision:

Precision is also called the margin of error. It is measured by the half of width of the interval estimates, i.e., the difference of
the upper and lower limits of the confidence interval.
Balancing Accuracy with Precision

Accuracy and precision are two opposite driving forces, they are inversely related. Our objective is to design an interval
estimator such that the confidence level sufficiently high the margin of error sufficiently small.

How to design an Interval Estimator

An interval estimator is usually designed in the following way: (i) take an unbiased point estimator, and (ii) define an interval
of reasonable width around it. We will use the above technique to design an interval estimator for population mean

An interval estimator for population Mean

(i) Sample mean X¯ is an unbiased point estimator. (ii) Define an interval estimator around it with margin of error equal to w:
X¯ − w, X¯ + w

Classical Versus Bayesian Approach

There are two important questions that must be addressed before designing a convenient estimator. The first one is why some
terms of the signal model are classified as random variables (w) whereas others are deterministic parameters (θ). The second
question is whether the nuisance parameters in x should be modelled as random or deterministic variables. In the classical
estimation theory, the wanted parameters θ are deterministic unknowns that are constant along the observation interval. On the
other hand, those unwanted terms varying “chaotically” along the observation interval are usually modelled as random
variables (e.g., the measurement noise, the signal amplitude in fast fading scenarios, the received symbols in a digital receiver,
etc.). Regarding the vector x, the nuisance parameters can be classified as deterministic constant unknowns, say xc, or random
variable unknowns, say xu. In the random case, we will assume hereafter that the probability density function of xu is known.
However, if this information were not available, the entries of xu could be considered deterministic unknowns and estimated
together with θ.

Session No. 12 - Hypothesis Testing

Learning Objectives

• Develop null and alternative hypotheses to test for a given situation.


• Understand the difference between one- and two-tailed hypothesis tests.
• Understand Type I and Type II errors

Introduction

In everyday life, we often have to make decisions based on incomplete information. These may be decisions that are
important to us such as, "Will I improve my biology grades if I spend more time studying vocabulary?" or "Should
I become chemistry major to increase my chances of getting into med school?" This section is about the use of
hypothesis testing to help us with these decisions. Hypothesis testing is a kind of statistical inference that involves
asking a question, collecting data, and then examining what the data tells us about how to precede.

Developing Null and Alternative Hypotheses

In statistical hypothesis testing, there are always two hypotheses. The hypothesis to be tested is called the null
hypothesis and given the symbol H0. The null hypothesis states that there is no difference between a hypothesized
population mean and a sample mean. It is the status quo hypothesis.
For example, if we were to test the hypothesis that college freshmen study 20 hours per week, we would express our
null hypothesis as:

H0 : µ = 20
We test the null hypothesis against an alternative hypothesis, which is given the symbol Ha. The alternative
hypothesis is often the hypothesis that you believe yourself! It includes the outcomes not covered by the null
hypothesis. In this example, our alternative hypothesis would express that freshmen do not study 20 hours per week:

Ha : µ ƒ= 20
Example A

We have a medicine that is being manufactured and each pill is supposed to have 14 milligrams of the active
ingredient. What are our null and alternative hypotheses?
Solution

H0 : µ =14

Ha : µ ƒ=14
Our null hypothesis states that the population has a mean equal to 14 milligrams. Our alternative hypothesis states
that the population has a mean that is different than 14 milligrams.

Deciding Whether to Reject the Null Hypothesis: One and Two-Tailed Hypothesis Tests

The alternative hypothesis can be supported only by rejecting the null hypothesis. To reject the null hypothesis
means to find a large enough difference between your sample mean and the hypothesized (null) mean that it raises
real doubt that the true population mean is 20. If the difference between the hypothesized mean and the sample mean
is very large, we reject the null hypothesis. If the difference is very small, we do not. In each hypothesis test, we
have to decide in advance what the magnitude of that difference must be to allow us to reject the null hypothesis.
Below is an overview of this process. Notice that if we fail to find a large enough difference to reject, we fail to
reject the null hypothesis. Those are your only two alternatives.

When a hypothesis is tested, a statistician must decide on how much of a difference between means is necessary in
order to reject the null hypothesis.
Statisticians
level you usedfirstinchoose a level confidence
constructing of significance or alpha
intervals, this(α) levellevel
alpha for their
tellshypothesis test. Similar
us how improbable to the significance
a sample mean must
be for it to be deemed "significantly different" from the hypothesized mean. The most frequently used levels of
significance are 0.05 and 0.01. An alpha level of 0.05 means that we will consider our sample mean to be significantly
different from the hypothesized mean if the chances of observing that sample mean are less than 5%. Similarly, an
alpha level of 0.01 means that we will consider our sample mean to be significantly different from the hypothesized
mean if the chances of observing that sample mean are less than 1%.
Two-tailed Hypothesis Tests

A hypothesis test can be one-tailed or two-tailed. The examples above are all two-tailed hypothesis tests. We indicate
that the average study time is either 20 hours per week, or it is not. Computer use averages 3.2 hours per week, or
it does not. We do not specify whether we believe the true mean to be higher or lower than the hypothesized mean.
We just believe it must be different.
In a two-tailed test, you will reject the null hypothesis if your sample mean falls in either tail of the distribution. For
this reason, the alpha level (let’s assume .05) is split across the two tails. The curve below shows the critical regions
for a two-tailed test. These are the regions under the normal curve that, together, sum to a probability of 0.05. Each
tail has a probability of 0.025. The z-scores that designate the start of the critical region are called the critical values
.
If the sample mean taken from the population falls within these critical regions, or "rejection regions," we would
conclude that there was too much of a difference and we would reject the null hypothesis. However, if the mean
from the sample falls in the middle of the distribution (in between the critical regions) we would fail to reject the
null hypothesis.

FIGURE 12.1

One-Tailed Hypothesis Test

We would use a single-tail hypothesis test when the direction of the results is anticipated or we are only interested in
one direction of the results. For example, a single-tail hypothesis test may be used when evaluating whether or not
to adopt a new textbook. We would only decide to adopt the textbook if it improved student achievement relative to
the old textbook.
When performing a single-tail hypothesis test, our alternative hypothesis looks a bit different. We use the symbols of
greater than or less than. For example, let’s say we were claiming that the average SAT score of graduating seniors
was GREATER than 1,110. Remember, our own personal hypothesis is the alternative hypothesis. Then our null
and alternative hypothesis could look something like:

H0 : µ ≤ 1100
Ha : µ >1100
In this scenario, our null hypothesis states that the mean SAT scores would be less than or equal to 1,100 while the
alternate hypothesis states that the SAT scores would be greater than 1,100. A single-tail hypothesis test also mea
that we have only one critical region because we put the entire critical region into just one side of the distribution. When the
alternative hypothesis is that the sample mean is greater, the critical region is on the right side of the distribution (see below).
When the alternative hypothesis is that the sample is smaller, the critical region is on the left side of the distribution.

FIGURE 12.2

To calculate the critical regions, we must first find the critical values or the cut-offs where the critical regions start.
This will be covered in the next section.

Type I and Type II Errors

Remember that there will be some sample means that are extremes – that is going to happen about 5% of the time,
since 95% of all sample means fall within about two standard deviations of the mean. What happens if we run a
hypothesis test and we get an extreme sample mean? It won’t look like our hypothesized mean, even if it comes
from that distribution. We would be likely to reject the null hypothesis. But we would be wrong.
When we decide to reject or not reject the null hypothesis, we have four possible scenarios:

a. A true hypothesis is rejected.


b. A true hypothesis is not rejected.
c. A false hypothesis is not rejected.
d. A false hypothesis is rejected.

If a hypothesis is true and we do not reject it (Option 2) or if a false hypothesis is rejected (Option 4), we have made
the correct decision. But if we reject a true hypothesis (Option 1) or a false hypothesis is not rejected (Option 3) we
have made an error. Overall, one type of error is not necessarily more serious than the other. Which type is more
serious depends on the specific research situation, but ideally both types of errors should be minimized during the
analysis.

TABLE 12.1: The Four Possible Outcomes in Hypothesis Testing


Decision Made Null Hypothesis is True Null Hypothesis is False
Reject Null Hypothesis Type I Error Correct Decision
Do not Reject Null Hypothesis Correct Decision Type II Error

The general approach to hypothesis testing focuses on the Type I error: rejecting the null hypothesis when it may
be true. Guess what? The level of significance, also known as the alpha level, IS the probability of making a Type
I error. At the 0.05 level, the decision to reject the hypothesis may be incorrect 5% of the time. Calculating the
probability of making a Type II error is not as straightforward as calculating a Type I error, and we won’t discuss
that here.
You should be able to recognize what each type of error looks like in a particular hypothesis test. For example,
suppose you are are testing whether listening to rock music helps you improve your memory of 30 random objects.
Assume further that it doesn’t. A Type I error would be concluding that listenting to rock music did help memory
(but you are wrong). A Type I error will only occur when your null hypothesis is false. Let’s assume that listening
to rock music does improve memory. In this scenario, if you concluded that it didn’t, you would be wrong again.
But this time you would be making a Type II error — failing to find a significant difference when one in fact exists.

It is also important that you realize that the chance of making a Type I error is under our direct control. Often we
establish the alpha level based on the severity of the consequences of making a Type I error. If the consequences are
not that serious, we could set an alpha level at 0.10 or 0.20. In other words, we are comfortable making a decision
where we could falsely reject the null hypothesis 10 to 20% of the time. However, in a field like medical research,
we would set the alpha level very low (at 0.001 for example) if there was potential bodily harm to patients.

Lesson Summary

a. Hypothesis testing involves making educated guesses about a population based on a sample drawn from the
population. We generate null and alternative hypotheses based on the mean of the population to test these
guesses.
b. We establish critical regions based on level of significance or alpha (α)levels. If the value of the test statistic
falls in these critical regions, we are able to reject it.
c. When we make a decision about a hypothesis, there are four different outcome and possibilities and two
different types of errors. A Type I error is when we reject the null hypothesis when it is true and a Type II
error is when we do not reject the null hypothesis, even when it is false.

Review Questions

1. If the difference between the hypothesized population mean and the mean of the sample is large, we the null
hypothesis. If the difference between the hypothesized population mean and the mean of the sample is small,
we the null hypothesis.
2. At the Chrysler manufacturing plant, there is a part that is supposed to weigh precisely 19 pounds. The
engineers take a sample of parts and want to know if they meet the weight specifications. What are our null
and alternative hypotheses?
3. In a hypothesis test, if difference between the sample mean and the hypothesized mean divided by the standard
error falls in the middle of the distribution and in between the critical values, we the null hypothesis. If this
number falls in the critical regions and beyond the critical values, we the null hypothesis.

Review Answers
1. Reject, Fail to Reject

2. H0 : µ = 19, Ha : µ =ƒ 19
3. Fail to Reject, Reject
Session No. 13 - Critical Values

Learning Objective

• Understand the relationship between the critical value and the critical region.
• To accurately identify the critical region for a one- or two-tailed test.
• To locate the critical value for a given significance level.

Critical Values

Critical values are the values that indicate the edge of the critical region. Critical regions describe the entire area
of values that indicate you reject the null hypothesis. In other words, the critical region is the area encompassed by
the values not included in the initial claim - the area of the ’tails’ of the distribution.
The “tails” of a test are the values outside of the critical values. In other words, the tails are the ends of the
distribution, and they begin at the greatest or least value included in the alternative hypothesis (the critical values).
In the graph below, the tails are in red and the rest of the distribution is in green. The critical values of the test in the
image are -8 and 28, as these are the dividers between values supporting the alternative and null hypothesis. The area
in red can also be seen as the rejection region, since an observed value in this region indicates that the null
hypothesis should be rejected.

Hypothesis Tests and Their Tails

There are three types of test from a “tails” standpoint:


• A left-tailed test only has a tail on the left side of the graph:

• A right-tailed test only has a tail on the right side of the graph:
A two-tailed test has tails on both ends of the graph.

Example A

A researcher claims that black horses are, on average, more than 30 lbs heavier than white horses, which average
1100 lbs. What is the null hypothesis, and what kind of test is this?

Solution

The null hypothesis would be notated H0 : µ ≤ 1130 lbs


This is a right-tailed test, since the tail of the graph would be on the right. Recognize that values above 1130 would
indicate that the null hypothesis be rejected, and the red area represents the rejection region.

Example B

A package of gum claims that the flavor lasts more than 39 minutes. What would be the null hypothesis of a test to
determine the validity of the claim? What sort of test is this?

Solution

The null hypothesis would by notated as H0 : µ ≤ 39.


This is a right-tailed test, since the rejection region would consist of values greater than 39.
Locating a Critical Value

In this lesson, we will use a table to find critical values. For the moment, we will be dealing only with the Z-score
critical values of a normal distribution. (NOTE: The z-table is an appropriate resource for conducting tests when
we know what the parameters are of our population. However, we will turn to a new table when we discuss how to
conduct your typical hypothesis test with a sample.)

Example C
. Σ
What is the critical value Z αz for a 95% confidence level, assuming a two-tailed test?

Solution

A 95% confidence level means that a total of 5% of the area under the curve is considered the critical region.
Since this is a two-tailed test, 1 of 5% = 2.5% of the values would be in the left tail, and the other 2.5% would be in
2
the right tail. Looking up the Z-score associated with 0.025 on a reference table, we find 1.96. Therefore, +1.96 is
the critical value of the right tail and -1.96 is the critical value of the left tail.

The critical value for a 95% confidence level is Z = +/−1.96.


Example D

Sketch the Z-score critical region for Example C

Solution

Sketch the graph of the normal distribution with the given values and mark the critical values from Example C, then
shade the area from the critical values away from the center. The shaded areas are the critical regions.
Example E

What would be the critical with alpha = 0.01?

It appears that the critical value is Z = 2.33 .



A Z-score of +2.33 is well to the right of the center of the graph, and describes the area under the curve

Vocabulary

Critical values are values separating the values that support or reject the null hypothesis.
Critical regions are the areas under the distribution curve representing values that support the null hypothesis.

Guided Practice

1. What would be the critical value for a left-tailed test with α = 0.01?
2. What would be the critical region for a two-tailed test with α = 0.08?

3. What would be the α for a right-tailed test with a critical value of Z = 1.76?
Solutions
1. A
weleft-tailed
use a reference to α
test with = 0.01
find would have
the Z-score 99% we
for 0.99, of the
getarea under the curve
approximately 2.33. outside
However,of atheZ-score
criticalofregion.
2.33 isIf
significantly to the right of the center of the distribution, including all the area to the left and only leaving a
very small alpha value on the right. While we are indeed looking for a critical value with only a very small
alpha, this is a left-tailed test, so the critical value we need is negative. The solution is z = -2.33.

2. We are looking for the critical region here, but let’s start by finding the critical values. This is a two-tailed
test, so half of the alpha will be in the left tail, and half in the right. That means that we are looking for a
positive/negative critical value associated with an alpha of 0.04, which indicates that we need to find the
Z-score for (1 − 0.04) = 0.96. Referring to the Z-score table, we see that 0.96 corresponds to approximately
1.75. The critical values, then are +/- 1.75, and the critical region would be Z < − 1.75 ∪ Z > 1.75.
Since
The96.08% of the
area under thearea is to
curve the left ofwith
associated Z = 1.76, thatofleaves
1.76, approximately 1 reference
0.9608 =table
0.0392 as the
is area 3.
the critical region. The solution is alpha =a0.0392.
Z-score according to the above, 0.9608.in

Additional Guided Practice

For each question:


a) State the null and alternative hypothesis for a test to determine the validity of the claim
b) Identify left, right, or two-tailed test type

1. The average Siberian Husky weighs more than 35 pounds.


2. The United Parcel Service claims less than 5-day shipping times for ground packages.

Solutions

1. (a) H1 : µ > 35 lbs and H0 : 35 lbs ≥ µ


(b) This is a right-tailed test, since the rejection region is located on the right end of the graph.
2. (a) H1 : µ < 5 days and H0 : µ ≥ 5 days
(b) This is a left-tailed test, since the ’reject’ values are on the left end of the graph.

More Practice

For each question:


a) State the null and alternative hypothesis for a test to determine the validity of the claim
b) Identify left, right, or two-tailed test type

1. The average miniature horse is less than 34 inches at the shoulder. Tiny Equines claims that their miniature
horses are an average of 3 inches less than the breed average.
2. Speedy Solutions is a delivery company that claims all deliveries average less than 72 hours.
3. Terrific Textiles claims that 45% to 55% of t-shirts sold in CO are red.
4. Gas Hater Car Sales claims that 70% or more of the cars on the lot average more than 40 mpg.
5. The 2011 average service time for Fast Fatz Burgers was 56 seconds. The store manager claims that the 2012
average is more than 5 seconds faster.
Session 14 - One-Sample t - Test

Learning Objectives

• Understand the steps of hypothesis testing.


• Know when to use a z-test and when to use a t-test to test a single-sample hypothesis.
• Compare the t-distribution to the Normal distribution.
• Understand degrees of freedom.

Steps of Hypothesis Testing

Recall that hypothesis testing is a form of statistical inference. Previously, we inferred about a population by
calculating a confidence interval. We estimated the true mean of a population from a sample mean and created a
confidence interval provided a margin of error for our estimate. In this chapter, we also use sample data to help us
make decisions about what is true about a population.
When conducting a hypothesis test, we are asking ourselves whether the information in the sample is consistent, or
inconsistent, with the null hypothesis about the population. We follow a series of four basic steps:

1. State the null and alternative hypotheses.


2. Select the appropriate significance level and check the test assumptions.
3. Analyze the data and compute the test statistic.
4. Interpret the result

If we reject the null hypothesis we are saying that the difference between the observed sample mean and the
hypothesized population mean is too great to be attributed to chance. When we fail to reject the null hypothesis, we
are saying that the difference between the observed sample mean and the hypothesized population mean is probable
if the null hypothesis is true. Essentially, we are willing to attribute this difference to sampling error.

Conducting a Hypothesis Test on One Sample Mean When the Population Parameters are Known

Although this is rarely the case, we can use our familiar z-statistic to conduct a hypothesis test on a single sample
mean. In short, we find the z-statistic of our sample mean in the sampling distribution and determine if that z-score
falls within the critical (rejection) region or not. This test is only appropriate when you know the true mean and
standard deviation of the population.

Example A

The school nurse thinks the average height of 7th graders has increased. The average height of a 7th grader five years
ago was 145 cm with a standard deviation of 20 cm. She takes a random sample of 200 students and finds that the
average height of her sample is 147 cm. Are 7th graders now taller than they were before? Conduct a single-tailed
hypothesis test using a .05 significance level to evaluate the null and alternative hypotheses.
First, we develop our null and alternative hypotheses:
H0 : µ ≤ 145
Ha : µ > 145

Choose α =in
cuts off 5% .05.
theThe critical
single valuetest
tail. Any forstatistic
this onegreater
tailed test
thanis1.64
z=1.64.
will This
be in isthea one-tailed test, and a z-score of 1.64
rejection region.
Next, we calculate the test statistic for the sample of 7th graders.

147 − 145
z= ≈ 1.414
√20
200

The calculated z−score of 1.414 is smaller than 1.64 and thus does not fall in the critical region. Our decision is to
fail to reject the null hypothesis and conclude that the probability of obtaining a sample mean equal to 147 is likely
to have been due to chance.

Example B

A farmer is trying out a planting technique that he hopes will increase the yield on his pea plants. The average
number of pods on one of his pea plants is 145 pods with a standard deviation of 100 pods. This year, after trying
his new planting technique, he takes a random sample of his plants and finds the average number of pods to be 147.
He wonders whether or not this is a statistically significant increase. What are his hypotheses and the test statistic?

1. First, we develop our null and alternative hypotheses:

H0 : µ ≤ 145
Ha : µ > 145

This alternative hypothesis is >since he believes that there might be a gain in the number of pods.

2. Next, we calculate the test statistic for the sample of pea plants.

(x¯ − µ) (147 − 145)


z= σ = ≈ 0.24
√n √100
144

2. If we choose α =.05
3. The critical value will be 1.645. We will reject the null hypothesis if the test statistic is greater than 1.645.
The value of the test statistic is 0.24.
4. This is less than 1.645 and so our decision is to fail to reject H0.
5. Based on our sample we believe the mean is equal to 145.

Reporting P-Values as an Alternative to Looking at Critical Regions

We can also evaluate a hypothesis by asking, “What is the probability of obtaining the value of the test statistic we
did if the null hypothesis is true?” This is called the p− value.
Example C

Let’s use the example about the pea farmer. As we mentioned, the farmer is wondering if the number of pea pods
per plant has gone up with his new planting technique and finds that out of a sample of 144 peas there is an average
number of 147 pods per plant (compared to a previous average of 145 pods). To determine the p value we ask

what is P(z > .24)? That is, what is the probability of obtaining a z value greater than .24 is the null hypothesis is
true? Using technology, we find this probability to be .49. This indicates that there is a 49% chance that under the
null hypothesis the peas will produce more than 145 pods. Alternatively, we can just indicate that p >.05. Since we
set alpha at .05, we won’t reject if the probability of observing that sample mean is >.05.
When you use technology to conduct a hypothesis test, as in lab, you will receive a p-value as part of your output.
The p-values is the likelihood of observing that particuluar sample value if the null hypothesis were true. Therefore,
if the p-value is smaller than your significance level, you can reject the null hypothesis.

Hypothesis Tests When You Don’t Know Your Population Parameters

A z-test makes for an easy hypothesis test, but most of the time we can’t use it. The reality is that most of our
analyses are done when we don’t know what is true about a population. We don’t know the true population mean,
and we certainly don’t know the true population standard deviation. Instead, we want to conduct a hypothesis test
using only our sample and the information it can provide us. How can we do this?
How We Learned to Test Hypotheses on Samples, without Knowledge of the Population
Back in the early 1900’s, a chemist at a brewery in Ireland discovered that when he was working with very small
samples, the distributions of the mean differed significantly from the normal distribution. He noticed that as his
sample sizes changed, the shape of the distribution changed as well. He published his results under the pseudonym
’Student’ and this concept and the distributions for small sample sizes are now known as “Student’s t−distributions.”
The Student’s t-distribution is similar to the normal distribution, except it is more spread out and wider in appear-
ance, and has thicker tails. As the number of observations gets larger, the t-distribution shape becomes more and
more like the shape of the normal distribution. In fact, if we had an infinite number of observations, the t distribution
would perfectly match the normal distribution. It is the t-distribution that allows us to test hypotheses when we don’t
know the true population standard deviation, as we’ll see below.

FIGURE 12.3

The differences between the t-distribution and the normal distribution are more exaggerated when there are fewer
data points, and therefore fewer degrees of freedom. Degrees of freedom are essentially the number of samples
that have the ’freedom’ to change without affecting the sample mean. A clear description of degrees of freedom is
beyond the scope of this lesson, but you can find many online lessons describing them if you are interested. For our
purposes, all you really need to know about degrees of freedom is that there is always one less degree of freedom
than the number of data points:

d f = n− 1
The reason you need to know how to find the number of degrees of freedom is quite simple: when you use a t-
distribution for a hypothesis test, there is a different critical value for each number of degrees of freedom. The larger
your sample, the closer the critical value gets to the z-score for your alpha level. Below is the t-table. It shows you
the critical value for the selected alpha level (across the top) for the degrees of freedom of your test. If you were
conducting a two-tailed hypothesis test on a sample of 25 students, your df = 24 and your critical value at α=0.05 is
±2.064 because there is 0.025 in each tail.

Conditions for Using T-Test

The t −distribution can be used with any statistic having a bell-shaped distribution. The Central Limit Theorem states
the sampling distribution of a statistic will be close to normal with a large enough sample size. As a rough estimate,
the Central Limit Theorem predicts a roughly normal distribution under any of the following conditions:

• The population distribution is normal; or


• The sampling distribution is symmetric and the sample size is ≤ 15;’ or
• The sampling distribution is moderately skewed and the sample size is 16 ≤ n ≤ 30; or
• The sample size is greater than 30, without outliers.

T Table
TABLE 12.3: Upper-Tail Probability

DF 0.25 0.20 0.15 0.10 0.05 0.025 0.01 0.005 0.001


1 1.000 1.376 1.963 3.078 6.314 12.710 31.820 63.660 318.300
2 0.816 1.061 1.386 1.886 2.920 4.303 6.965 9.925 22.330
3 0.765 0.978 1.250 1.638 2.353 3.182 4.541 5.841 10.210
4 0.741 0.941 1.190 1.533 2.132 2.776 3.747 4.604 7.173
5 0.727 0.920 1.156 1.476 2.015 2.571 3.365 4.032 5.893
6 0.718 0.906 1.134 1.440 1.943 2.447 3.143 3.707 5.208
7 0.711 0.896 1.119 1.415 1.895 2.365 2.998 3.499 4.785
8 0.706 0.889 1.108 1.397 1.860 2.306 2.896 3.355 4.501
9 0.703 0.883 1.100 1.383 1.833 2.262 2.821 3.250 4.297
10 0.700 0.879 1.093 1.372 1.812 2.228 2.764 3.169 4.144
11 0.697 0.876 1.088 1.363 1.796 2.201 2.718 3.106 4.025
12 0.695 0.873 1.083 1.356 1.782 2.179 2.681 3.055 3.930
13 0.694 0.870 1.079 1.350 1.771 2.160 2.650 3.012 3.852
14 0.692 0.868 1.076 1.345 1.761 2.145 2.624 2.977 3.787
15 0.691 0.866 1.074 1.341 1.753 2.131 2.602 2.947 3.733
16 0.690 0.865 1.071 1.337 1.746 2.120 2.583 2.921 3.686
17 0.689 0.863 1.069 1.333 1.740 2.110 2.567 2.898 3.646
18 0.688 0.862 1.067 1.330 1.734 2.101 2.552 2.878 3.610
19 0.688 0.861 1.066 1.328 1.729 2.093 2.539 2.861 3.579
20 0.687 0.860 1.064 1.325 1.725 2.086 2.528 2.845 3.552
21 0.686 0.859 1.063 1.323 1.721 2.080 2.518 2.831 3.527

263
TABLE 12.3: (continued)
22 0.686 0.858 1.061 1.321 1.717 2.074 2.508 2.819 3.505
23 0.685 0.858 1.060 1.319 1.714 2.069 2.500 2.807 3.485
24 0.685 0.857 1.059 1.318 1.711 2.064 2.492 2.797 3.467
25 0.684 0.856 1.058 1.316 1.708 2.060 2.485 2.787 3.450
26 0.684 0.856 1.058 1.315 1.706 2.056 2.479 2.779 3.435
27 0.684 0.855 1.057 1.314 1.703 2.052 2.473 2.771 3.421
28 0.683 0.855 1.056 1.313 1.701 2.048 2.467 2.763 3.408
29 0.683 0.854 1.055 1.311 1.699 2.045 2.462 2.756 3.396
30 0.683 0.854 1.055 1.310 1.697 2.042 2.457 2.750 3.385
40 0.681 0.851 1.050 1.303 1.684 2.021 2.423 2.704 3.307
50 0.679 0.849 1.047 1.299 1.676 2.009 2.403 2.678 3.261
60 0.679 0.848 1.045 1.296 1.671 2.000 2.390 2.660 3.232
80 0.678 0.846 1.043 1.292 1.664 1.990 2.374 2.639 3.195
100 0.677 0.845 1.042 1.290 1.660 1.984 2.364 2.626 3.174
120 0.677 0.845 1.041 1.289 1.658 1.980 2.358 2.617 3.160
z* 0.674 0.842 1.036 1.282 1.645 1.960 2.326 2.576 3.090

T-Test for One Sample Mean

So when do we use the t-distribution and when do we use the normal distribution? It’s simple: When we know the
population standard deviation we use the normal distribution. When we don’t know the population standard deviation
(so we need to use our sample standard deviation), we use the t-distribution.
We use the Student’s t distribution
− in hypothesis testing the same way that we use the normal distribution. Each row
in the t distribution table (see above) represents a different t distribution.
− Each distribution is associated with a
unique number of degrees of freedom (the number of observations minus one). The column headings in the table
represent the portion of the area in the tails of the distribution –we use the numbers in the table just as we used the
z−scores.
In calculating the t−test statistic, we use the formula:

x¯ −µ0
t= √s
n
where:
t is the test statistic and has n− 1 degrees of freedom.
x¯ is the sample mean
µ0 is the population mean under the null hypothesis.
s is the sample standard deviation
n is the sample size
√s is the estimated standard error
n
Assumptions of the single sample t-test:

• A random sample is used.


• The random sample is made up of independent observations
• The population distribution must be nearly normal, or the size of the sample is large.
Example D

The high school athletic director is asked if football players are doing as well academically as the other student
athletes. We know from a previous study that the average GPA for the student athletes is 3.10. After an initiative to
help improve the GPA of student athletes, the athletic director randomly samples 20 football players and finds that
the average GPA of the sample is 3.18 with a sample standard deviation of 0.54. Is there a significant improvement?
Use a 0.05 significance level.

• Hypothesis Step 1: Cleary state the null and alternative hypotheses.

H0 : µ =3.10

Ha : µ ƒ=3.10
• Hypothesis Step 2: Identify the appropriate significance level and confirm the test assumptions.

We were told that we should use a 0.05 significance level. We assume that each football player is indepen-
dently tested –that their GPA is not related to another football player’s GPA. Without the data, we have to
assume that the sample is nearly normal (the sample is an indication of the population shape). The size of the
sample also helps here, as we have 20 players. So, we can conclude that the assumptions for the single sample
t-test have been met.

• Hypothesis Step 3: Analyze the data

We use our t-test formula:

x¯−µ 0 3.18 − 3.10


t= = =0.66
√s 0.54

n 20

265
We know that we have 20 observations, so our degrees of freedom for this test is 19. Nineteen degrees of freedom at
the 0.05 significance level gives us a critical value of ± 2.093.

• Hypothesis Step 4: Interpret your results

Since our calculated t-test value is lower than our t-critical value, we fail to reject the Null Hypothesis.
Therefore, the average GPA of the sample of football players is not significantly different from the average
GPA of student athletes. Therefore, we can conclude that the difference between the sample mean and the
hypothesized value is not sufficient to attribute it to anything other than sampling error. Thus, the athletic
director can conclude that the mean academic performance of football players does not differ from the mean
performance of other student athletes.

Lesson Summary

A test of significance is done when a claim is made about the value of a population parameter. The test can only be
conducted if the random sample taken from the population came from a distribution that is normal or approximately
normal. When you use s to estimate σ, you must use t instead of z to complete the significance test for a mean.

More Practice

1. In hypothesis testing, when we know the population standard deviation it is appropriate to use the -
distribution. When we do not know the population standard deviation, we should use the distribution
2. True or False: When we fail to reject the null hypothesis, we are saying that the difference between the
observed sample mean and the hypothesized population mean is probable if the null hypothesis is true.
3. The dean from UCLA is concerned that the student’s grade point averages have changed dramatically in recent
years. The graduating seniors’ mean GPA over the last five years is 2.75. The dean randomly samples 256
seniors from the last graduating class and finds that their mean GPA is 2.85, with a sample standard deviation
of 0.65.

a. What would the null and alternative hypotheses be for this scenario?
b. What would the standard error be for this particular scenario?
c. Describe in your own words how you would set the critical regions and what they would be at an alpha
level of .05.
d. Test the null hypothesis and explain your decision

FIGURE 12.5
3

Session No. 15: Confidence Intervals

• Statistical Estimation Point


Estimation Interval
Estimation

• Confidence Intervals
Two-sided Confidence Intervals One-sided
Confidence Intervals

• Student’s t Distribution

Statistical Estimation

Point Estimation: using the data to calculate a single estimate of the parameter of interest. For
example, we often use the sample mean x to estimate the population mean µ.

Interval Estimation: provides a range of values (an interval) that may contain the unknown
parameter (such as the population mean µ).

Confidence Intervals: an interval that contains the unknown

parameter (such as the population mean µ) with certain degree of confidence.

Example: Consider the distribution of serum cholesterol levels for all males in the US who are
hypertensive and who smoke. This distribution has an unknown mean µ and a standard deviation
46 mg/100ml. Suppose we draw a random sample of 12 individual from this population and find
that the mean cholesterol level is
x̄ = 217mg/100ml.

x̄ = 217mg/100ml is a point estimate of the unknown mean


cholesterol level µ in the population.

However, because of the sampling variability, it is important to

construct an interval estimate of µ to account for the sampling variability. A 95% confidence

interval for µ is
. Σ
46 46

217 − 1.96√ , 217 + 1.96√ .


or 12 12
4
(191, 243).

A 99% confidence interval for µ is


. Σ
46 46

217 − 2.58√ , 217 + 2.58√ .


or 12 12
(183, 251).
4

Confidence Intervals

Under the normality assumption


. Σ
σ σ
P X − 1.96√ ≤ µ ≤ X + 1.96√ = 0.95.
n n
In general, by the CLT, for reasonably large sample size n, the above
equation is still approximately true. Thus a 95% confidence interval for µ when σ is known is
. Σ
σ σ
x̄ − 1.96√ , x̄ + 1.96√ .
n n

Let zα/2 be the value that cuts off an area of α/2 in the upper tail of
the standard normal distribution. A 1 − α confidence interval for the population mean µ is

σ x̄ − σ
zα/2 √ , x̄ + zα/2 √
. n n Σ
5

Confidence Intervals: What do they mean?

In repeated sampling, from a normally distributed population with a known standard deviation,

100(1 − α) percent of all intervals of the form


. Σ
σ σ
x̄ − z1−α/2 √ , x̄ + z1−α/2 √
n n
will in the long run cover the population mean µ.

See the simulations in R.


22S:101 Biostatistics: J. Huang 6

Confidence Intervals

In general, a confidence interval of an unknown quantity is


+
point estimate − (reliability coefficient) × (standard error).

Sometimes, we call

margin of error = (reliability coefficient) × (standard error)


= half of the length of the confidence interval.
7

Sample size calculation based on specified length of CI

In the cholesterol level example, the 95% confidence interval is (191, 243). Its length is 243 −
191 = 52. How large a sample would we need to reduce its length to 20?

Recall that the 95% confidence interval is


. Σ
46 46
217 − 1.96√ , 217 + 1.96√ .
n n

The length of this confidence interval is 2 × 1.96× 46/ n. So to find the required sample size n, we
can solve the equation
46
2 × 1.96√ = 20.
n

We find . 1.96 46
Σ2 = 81.3 ≈ 82.
n=
×
10
8

One-sided confidence interval


Sometimes, we are interested in an upper limit for the population mean µ or a lower limit for µ. In
such cases, one-sided confidence intervals are appropriate.
Example: Consider the distribution of hemoglobin levels for the population of children under 6
who have been exposed to high levels of lead. Suppose that this distribution has sd σ =
0.85g100ml. Because children who have lead poisoning tend to have much lower levels of
hemoglobin than children who do not, we are interested in an upper confidence limit for µ, the
mean of the hemoglobin levels in this population.
Suppose that we have a random sample of 74 children from this population. The sample mean
x = 10.6g100ml. We construct a 95% upper confidence limit. The idea is to find c such that

. Σ
σ

P µ ≤ X + c√ = 0.95.
n
That is
. Σ
X−µ
P √ ≥ −c = 0.95.
σ/ n

Thus c = 1.645. The upper confidence limit is


0.85
10.6 + 1.645 × √ = 10.8.
74
9

Student’s t-distribution

So far we have assumed that σ is known. However, in reality, both µ and σ are usually unknown.
All we have is the data. Let x1, . . . , xn be the observations. Let the sample mean and sample
variance be
n n
1 Σ 1 Σ
− x) . 2
x= x, i s2 = (x i
n n−1
i=1 i=1

The confidence intervals can be constructed based on the following

t-statistic:


x µ
T= √ .
s/ n

We can compare the t-statistic with the z-statistic:


x−µ

Z= √ .
σ/ n
The difference is

• In Z, we use σ (when σ is known).

• In T , we use s (when σ is unknown).


10

Suppose the data is from the normal distribution N (µ, σ2). Then T has a t-distribution with n −
1 degrees of freedom. This is often denoted as

T ∼ tn−1.

This result was first obtained by W. S. Gosset in the paper “The Probable Error of a Mean,”
Biometrika, 6 (1908), 1-25. Gosset used the pseudonym “Student”. So this distribution is called
student’s t distribution, or in short, t-distribution.

SESSION 16 - CHI SQUARE

Pearson's chi-square test is used to determine whether there is a statistically significant difference between the expected
frequencies and the observed frequencies in one or more categories of a contingency table. The Chi-square test of
independence determines whether there is a statistically significant relationship between categorical variables. It is a
hypothesis test that answers the question—do the values of one categorical variable depend on the value of other categorical
variables? A chi-square goodness of fit test determines if a sample data matches a population. ... A very small chi square
test statistic means that your observed data fits your expected data extremely well. In other words, there is a relationship. A very
large chi square test statistic means that the data does not fit very well.

Assumptions of Chi Square Test


The assumptions of the Chi-square include: The data in the cells should be frequencies, or counts of cases rather than
percentages or some other transformation of the data. The levels (or categories) of the variables are mutually exclusive.
What does Chi Square mean?
A chi-square (χ2) statistic is a test that measures how expectations compare to actual observed data (or model results). ... For
example, the results of tossing a coin 100 times meet these criteria. Chi-square tests are often used in hypothesis testing.
How a Chi square test is interpreted?
For a Chi-square test, a p-value that is less than or equal to your significance level indicates there is sufficient evidence to
conclude that the observed distribution is not the same as the expected distribution. You can conclude that a relationship exists
between the categorical variables.
How is Chi square test of Independence calculated?
1. For each observed number in the table subtract the corresponding expected number (O — E).
2. Square the difference [ (O —E)2 ].
3. Divide the squares obtained for each cell in the table by the expected number for that cell [ (O - E)2 / E ].
11

Uses of Chi Square Test

The chi-squared distribution has many uses in statistics, including:


 Confidence interval estimation for a population standard deviation of a normal distribution from a sample standard
deviation.
 Independence of two criteria of classification of qualitative variables.
 Relationships between categorical variables (contingency tables).
 Sample variance study when the underlying distribution is normal.
 Tests of deviations of differences between expected and observed frequencies (one-way tables).
 The chi-square test (a goodness of fit test).
12
NOTES FOR SESSION 17 - CHI SQUARE TEST

Assumptions/Restrictions for Chi-square Tests on Contingency Tables


Tables Larger than 2x2
For tables larger than 2x2, the chi-square distribution with the appropriate degrees of freedom provides a good
approximation to the sampling distribution of Pearson's chi-square when the null hypothesis is true, and the following
conditions are met:
 Each observation is independent of all the others.
 No more than 20% pf the expected counts are less than 5 and all individual expected counts are 1 or greater.

Notice that it is okay to have some expected counts less than 5, provided none are less than 1, and at least 80% of the
expected counts are equal to or greater than 5.

2x2 Tables: The Standard Advice

The standard advice for 2x2 tables dates back to Cochran (1952, 1954) or earlier, and goes something like this:

 Each observation is independent of all the others (i.e., one observation per subject)*
 All expected counts should be 10 or greater.
 If any expected counts are less than 10, but greater than or equal to 5, some authors suggest that Yates'
Correction for continuity should be applied. This is done by subtracting 0.5 from the absolute value of O-E
before squaring. However, the use of Yates' correction is controversial, and is not recommended by all
authors.
 If any expected counts are less than 5, then some other test should be used (e.g., Fisher exact test for 2x2
contingency tables)**.
What you may not know, however, is that the minimum expected count of 5 appears to have been an arbitrary choice
(probably by Fisher), and that Cochran (1952) suggested it may need to be modified when new evidence became
available. A paper by Ian Campbell (2007) has provided some of that evidence.

2x2 Tables: Advice from Campbell (2007)

Campbell (2007) distinguishes between 3 different research designs that give rise to 2x2 tables:
13
1. Comparative trials. Here, samples are drawn from two populations, so the row (or column) totals are fixed,
and the question is whether the proportions falling into the two categories of the other variable are the same
or not.
2. Cross-sectional design (aka. naturalistic design, or double-dichotomy design). Here, one sample of N is
drawn, and subjects are classified on two dichotomous variables.
3. 2x2 independence trial. Here, both sets of marginal totals are fixed by the investigator. This is rarely the
case in practice.

Regarding the 2x2 independence trial, Campbell (2007, p. 3662) says, "Here there is no dispute that the Fisher-Irwin
test [i.e., the Fisher exact test] (or Yates's approximation to it) should be used." But as noted, this situation rarely
arises in practice, which is why Campbell focuses on the first two designs almost exclusively.

SESSION 18 – 19, ANOVA

The ANOVA Test

With the help of ANOVA, you test groups to see if there’s a difference between them. Examples of when you might

want to test different groups:

 A group of psychiatric patients are trying three different therapies: counseling, medication and biofeedback.

You want to see if one therapy is better than the others.

One-way or two-way refers to the number of independent variables (IVs) in your Analysis of Variance test.

 One-way has one independent variable (>= 2 levels). For example: brand of cereal,

 Two-way has two independent variables (it can have multiple levels). For example: brand of cereal, calories.

What are “Groups” or “Levels”?

Groups or levels are different groups within the same independent variable. In the above example, your levels for

“brand of cereal” might be Lucky Charms, Raisin Bran, Cornflakes — a total of three levels. Your levels for

“Calories” might be: sweetened, unsweetened — a total of two levels. The details of conducting a one-way

ANOVA fall into three categories: (1) writing hypotheses, (2) keeping the calculations organized, and (3) using the

F-tables. The null hypothesis is that all of the population means are equal, and the alternative is the all of the means
14
are not equal.

H01: Mean of all the groups are equal.

H02: Mean of all the groups are not equal.

Keeping the calculations organized is important when you are finding the variance within. Remember that the variance
within is found by squaring, and then summing, the distance between each observation and the mean of its sample.

Example1; The young bank manager is still struggling with finding the best way to staff her branch. She knows that
she needs to have more tellers on Fridays than on other days, but she is trying to find if the need for tellers is constant
across the rest of the week. She collects data for the number of transactions each day for two months. Here are her
data:

Mondays: 276, 323, 298, 256, 277, 309, 312, 265, 311

Tuesdays: 243, 279, 301, 285, 274, 243, 228, 298, 255

Wednesdays: 288, 292, 310, 267, 243, 293, 255, 273

Thursdays: 254, 279, 241, 227, 278, 276, 256, 262

and decides to use α – .05.

Solution
Ho: mm=mtu=mw=mth (All means are equal)
H1; All means are not equal.

Mean of Mondays(mm) = 291.8, Mean of Tuesdays(mtu) = 267.3, Mean of Wednesday(mw)= 277.6 Mean of
Thursday = 259.1 and the grand mean = 274.3

computes variance within:

[(276-291.8)2+(323-291.8)2+…+(243-267.6)2+…+(288-277.6)2+…+(254-259.1)2]/ [34-4] =15887.6/30=529.6

Then computes variance between:

[9(291.8-274.3)2+9(267.3-274.3)2+8(277.6-274.3)2+8(259.1-274.3)2] / [4-1]

= 5151.8/3 = 1717.3

She computes her F-score:

Using the F-tables is the third detail. Remember that F-tables are one-tail tables and that ANOVA is a one-tail test.
The number of degrees of freedom is m-1, n–m, where m is the number of samples and n is the total size of all the
samples together. the calculated F-value is 3.24, while the F-table (F-Critical) for α = .05 and 3, 30 df, is 2.92.
15
Because her F-score is larger than the critical F-value the mean number of transactions is not equal on different days
of the week.

SESSION 20 – BIVARIATE ANALYSIS


Bivariate analysis examines how two variables are related to each other. The most common bivariate statistic is the
bivariate correlation (often, simply called “correlation”), which is a number between -1 and +1 denoting the strength
of the relationship between two variables. Let’s say that we wish to study how age is related to self-esteem in a sample
of 20 respondents, i.e., as age increases, does self-esteem increase, decrease, or remains unchanged. If self-esteem
increases, then we have a positive correlation between the two variables, if self-esteem decreases, we have a negative
correlation, and if it remains the same, we have a zero correlation. To calculate the value of this correlation, consider
the hypothetical dataset shown in Table.

The formula for calculating bivariate correlation is:

The manually computed value of correlation between age and self-esteem, using the above formula is 0.79. This
figure indicates that age has a strong positive correlation with self-esteem, i.e., self-esteem tends to increase with
increasing age, and decrease with decreasing age.
SESSION 21: Simple Linear Regression
Regression is an analysis of the relationship of one variable to another, for example, the relationship between car
speed and the number of fatal accidents. In this example, speed and number of accidents are the two variables; the
number of accidents is said to be the dependent variable, because the number of accidents depends on the speed.
Speed is considered the independent variable. Regressions not only allow us to determine whether a relationship exists
but also to identify how strong that relationship is. The measure of this relationship is known as the regression
coefficient. If the regression coefficient is relatively low, then speed may not be the major factor in fatal accidents.
16
Perhaps the major factor is the time of day, whether it rained or not, or if alcohol was involved. With multiple
regression, a number of independent variables can be tested against the dependent variable at the same time. The
regression coefficient would determine which variables have the strongest relationship with the dependent variable.
In business, you will frequently use regression to predict future events. Though not an exact science, regression can
be used to make reliable predictions if enough variables are identified. For example, first responders could use
regression outputs to predict the number of fatal accidents in a given shift based on average travel speed, time of day,
weather, and any other factors deemed significant. This unit will also stress the importance of determining the factors
that most likely contribute to a dependent variable. Regression is often used in finance. Investors often want to know
the relationship between a stock's performance and the overall performance of the market. By regressing the period
returns of a stock with the returns of the market, investors can see the regression coefficient.
Assumptions
Linear regression analysis is based on six fundamental assumptions:
1. The dependent and independent variables show a linear relationship between the slope and the intercept.
2. The independent variable is not random.
3. The value of the residual (error) is zero.
4. The value of the residual (error) is constant across all observations.
5. The value of the residual (error) is not correlated across all observations.
6. The residual (error) values follow the normal distribution.
Simple linear regression is a model that assesses the relationship between a dependent variable and an independent
variable. The simple linear model is expressed using the following equation:
ŷ = b0 + b1x + ϵ
Y = Dependent variable, X = Independent (explanatory) variable, b0 = Intercept, b1 = Slope,
ϵ = Residual (error)
Example
Last year, five randomly selected students took a math aptitude test before they began their statistics course. The
Statistics Department has three questions.
 What linear regression equation best predicts statistics performance, based on math aptitude scores?

 If a student made an 80 on the aptitude test, what grade would we expect her to make in statistics?
 How well does the regression equation fit the data?
Student xi yi (xi- x̄)2 (yi- ӯ)2 (xi - x̄) (yi - ӯ)

1 95 85 289 64 136
2 85 95 49 324 126
3 80 70 4 49 -14
4 70 65 64 144 96
5 60 70 324 49 126
Sum 390 385 730 630 470
17
Mean 78 77

First, we solve for the regression coefficient (b1):

b1 = Σ [ (xi - x) (yi - ӯ)] / Σ [ (xi - x̄)2]

b1 = 470/730

b1 = 0.644

Once we know the value of the regression coefficient (b 1), we can solve for the regression slope (b0):

b0 = y - b1 * x

b0 = 77 - (0.644) (78)

b0 = 26.768

Therefore, the regression equation is: ŷ = 26.768 + 0.644x.


12
13

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