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In this and the next lesson we look at tests of statistical inference for small samples. Broadly the main theoretical issues underlying tests of statistical inference are similar to the large samples. Since the previous few lessons have analyzed these issues at length we shall not spend too much time on the theory in this chapter. In this lesson we will briefly review the main theoretical properties of the t distribution and then determine principles of statistical inference under various situations. By the end of this chapter you should be able to 1. Review of the theoretical aspects of t distribution. 2. Carryout hypothesis testing using the t distribution for small samples 3. Apply the principles of hypothesis testing of differences between means for small sample sizes. 4. Carryout tests of differences between means for dependent samples . Theoretical aspects of the t distribution Theoretical work on the t distribution was done by W.S. Gosset in the 1900s. The students t distribution is used under two circumstances: 1. Sample size, n , is less than 30. 2. Where population standard deviation is not known. In this case t tests may be used even if the sample size is greater than 30. We also assume that the population underlying a t distribution is normal or approximately normal. Characteristics of the t distribution Relationship between the t distribution and normal distribution: 1. Both distributions are symmetrical. However as can be seen in figure1 the t distribution is flatter than the normal distribution and is higher in the tails and has proportionately less area in the around the mean. This implies that we have to go further out from the mean of a t distribution to include the same area under the curve. Thus interval widths are much wider for a t distribution. 3. There is a different t distribution for every possible sample size. 3. As sample size increases, the shape of the t distribution loses its flatness and becomes approximately equal to the normal distribution. In fact for sample sizes greater than 30 the t distribution becomes less dispersed and approximates a normal distribution and we can use the normal distribution. Figure 1

Degrees of Freedom

What is Degree of Freedom? This is defined as the number of values we can choose freely. The concept is best illustrated with the help of an example: Consider the case: a+b/2=18 Given that the mean of these two numbers has to equal 18, how do we determine values for a and b? Basically we can slot in any two values such that they add up to 36. Suppose a=10. then b has to equal 26 given the above constraint. Thus in a sample of two where the value of the mean is specified ( i.e., a constraint) we are only free to specify one variable. Therefore we have only one degree of freedom. Another example: a+b+c+d+e+f+g/7=16 Now we have 7 variables. Given the mean we are free to specify 6 variables. The value of the 7 th variable is determined automatically. For a sample size of n we can define a t distribution for degree of freedom n-1. Using The t Distribution Tables

The t table differs in construction from the normal table in that

it is more compact. It shows areas under the curve and t values for a limited number of level of significance (usually .01, .05, .10). t values are therefore defined for level of significance and degrees of freedom.

A second difference is that we must specify the degrees of

freedom with which we are dealing. Suppose we are making an estimate for a n=14, at 90% level of confidence. We would go down vertically to determine the degrees of freedom (i.e. 13) and then read of the appropriate t value for a level of significance of .1.

The normal tables focus on the chance of that the sample

statistic lies within a given number of standard deviations on either side of the population mean. The t distribution tables on the other hand measures the chance that the observed sample statistic will lie outside it our confidence interval, defined by a given number of standard deviations on either side of the mean. A t value of 1.771 shows that if we mark off plus and minus 1.771s x = on either side of the mean then we enclose 90% of the area under the curve. The area outside these limits, i.e., that of chance error, will be 10%.This is shown in the

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Figure 2 below. Thus if we are making an estimate at the 90% confidence limit we would look in the t tables under the .1 column (1.0-.9=.1). This is actually or the probability of error. Figure 2

Exercise 1. Find t values for the following: 2. n=13, 90% 3. n=25, 95% 4. Given the following sample sizes and t values find the corresponding confidence levels:

RESEARCH METHODOLOGY

Reading the t table A sample excerpt from the t table is presented below in table 1. We can use it to read of t values for different levels of significance, degrees of freedom. Table 1

t Values for one Tailed Tests The procedure for using t tests for a one tailed test is conceptually the same as for a one tailed normal test. However the t tables usually give the area in both tails combined at a specific level of significance. For a one tailed test t test, we need to determine the area located in only one tail. For example to find the appropriate t value for a one tailed test at a level of significance of .05 with 12 degrees of freedom we look in the table under the .10 column opposite 12 degrees of freedom. The t value is 1.782. This is because the .10

Example For the following sample sizes and significance levels find the appropriate t values: 1. n=28, a =.05 degrees of freedom= 28-1 =27 t=2.048 2. n=10, 99% t=3.250

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column represents .10 of the area contained under both tails combined. Therefore it also represents .05 of the area contained in each tail separately.

degrees of freedom=9

143

Exercise Find one tail value for n=13, a =.05 % degrees of freedom=12 T value for one tail test we need to look up the value under the .10 column t= 1.782 Find one tail t values for the following:

The calculated t value should be compared with the table t value. If t calculated< t critical we accept the null hypotheses that there is no significant difference between the sample mean and the hypothesized population mean. If the calculated t value > t critical we reject the null hypotheses at the given level of significance. An example shall make the process clearer: A personnel specialist is a corporation is recruiting a large number of employees. For an overseas assignment. She believes the aptitude scores are likely to be 90. a management review finds the mean scores for 20 test results ot be 84 with a standard deviation of 11. Management wish to test the hypotheses at the .10 level of significance that the average aptitude score is 90. Our data is as follows; Ho: = 90 a =.10 Degrees of freedom=19 To find t critical we look under the t table under the .10 column, which gives the t value for .05 under both sides of the t curve. t. =1.729 As population standard deviation is not known we estimate it : Ha: 90 n=20

RESEARCH METHODOLOGY

Hypothesis Testing Using The t Distribution The procedure for hypothesis testing using the t test is very similar to that followed for the normal test. Instead of calculating the z statistic we calculate a t statistic. The formula for the t statistic is

t=

where

x x

The t test is the appropriate test to use when population standard deviation is not known and has to be estimated by the sample standard deviation.

This represents the basic t test. Variants of this formula are developed to meet the requirements of different testing situations. We shall look at more common types of problems briefly. As the theoretical basis of hypothesis is the same as the normal distribution and has been dealt with in detail in the last chapter, we shall focus on applications of the t test to various situations. 1. Hypotheses testing of means The t test is used when : 1. the sample size is <30 or 2. When population standard deviation not known and has to be estimated by the sample standard deviation. 3. When a population is finite and the sample accounts for more than 5% of the population we use the finite population multiplier and the formula for the standard is modified to;

Standard error of sampling mean

x =

t=

11 = = 2. 46 n 20

x 84 90 = = 2.44 x 2.46

Therefore since 2.44< -1.729 we reject the personnel managers hypotheses that the true mean of employees being tested is 90. This is also illustrated diagrammatically in figure 3 Figure 3

.05 of area

x =

N n N 1

-2.44 -1.729

Exercises

1.729

Two Tailed Test: The specification of the null and alternative hypotheses is similar to the normal distribution. Ho: = o Ha: o This is tested at a prespecified level of significance The t statistic is

1. Given a sample mean 83, Given a sample mean of 94.3, a sample standard deviation of 12.5 and a sample size of G size of 22, test the hypothesis that the value of the population mean is 70 against the alternative the hypothesis that it is more than 100. Use the 0.025 significance level. 2. If a sample of 25 observations reveals a sample mean of 52 a sample variance of 4.2, test the hypothesis that the population mean is 05 against the alternative hypothesis that it is some other value. Use the .01 level of significance. . 3. Picosoft, Ltd., a supplier of operating system software for personal computers, was planning the initial public

t=

x x

144

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offering of its stock in order to raise sufficient working capital to finance the development of a new seventhgeneration integrated system. With current earnings $1.61 a share, Picosoft and its underwriters were contemplating an offering price of $21, or about 13 times earnings. In order to check the appropriateness of this price, they randomly chose seven publicly traded software firms and found that their average price/ earnings ratio was 11.6, and the sample standard deviation was 1.3. At = .02 can Picosoft conclude that the stocks of publicly traded software firms have an average P /E ratio that is significantly different from 13? 4. The data-processing department at a large life insurance company has installed new color video display terminals to replace the monochrome units it previously used. The 95 operators trained to use the new machines averaged 7.2 hours before achieving a satisfactory level of performance. Their sample variance was 16.2 squared hours. Long experience with operators on the old monochrome terminals showed that they averaged 8.1 hours on the machines before their performances were satisfactory. At the 0.01 significance level, should the supervisor of the department conclude that the new terminals are easier to learn to operate? TEsts for Differences Between Means Small Samples Again broadly the procedure for testing whether the sample means from two different samples are not significantly different from each other is the same as for the large sample case. The differences are in the calculation of the standard error formula and secondly in the calculation of the degrees of freedom. Degrees of Freedom In the earlier case where we had tested the sample against a hypothesized population value, we had used a t distribution with n-1 degrees of freedom. In this case we have n1 1 degrees of freedom for sample 1 and n 2 1 for sample 2. When we combine the sample to estimate the pooled variance we have n1 + n2 2 degrees of freedom . Thus for example if n 1 =10 and n 2 = 12 the combined degrees of freedom = 20 Estimation of Sample Standard Error of the difference Between Two Means. In large samples had assumed the unknown population variances were equal and we estimated by s 12 and s 22 . This is not appropriate for small samples. We assume the underlying population variances are equal: s 12= s 22 we estimate population variance as a weighted average of s 12 and s 22 where the weights are numbers of degrees of freedom in each sample.

2 ( n1 1) s12 + ( n2 1) s 2 s = n1 + n2 2 2 p

RESEARCH METHODOLOGY

x1 x 2

x1 x2 = s p

The null hypotheses in this case is Ho: 1 = 1

1 1 + n1 n2

Ha: 11

t=

x1 x 2 x1 x2

An example will help make this clearer: A company investigates two programmes for improving the sensitivity of its managers. One was a more informal one whereas the second involved more formal classroom instruction. The informal programme is more expensive and the president wants to know at the .05 level of significance whether this expenditure has resulted in greater sensitivity. 12Managers were observed for the first method and 15 for the second. The sample data is as follows:

Programme

Mean

1 2

Ho: 1 = 1 Ha: 1 >1 The next step is to calculate estimate of the population variance :

s2 p =

2 ( n1 1) s12 + (n 2 1) s2 (12 1)(15) 2 + (15 1)(19) 2 = = 17. 35 n1 + n 2 2 12 + 15 2

x1 x2 = s p

1 1 1 1 + = 17.35 + n1 n 2 12 15 = 6.72

We then calculate the t statistic for the difference between two means:

t=

x1 x 2 92 84 = = 1.19 x1 x2 6.72

since it is a one tailed test at the .05 level of significance we look in the .1 column against 25 degrees of freedom. t. critical at .05 level of significance= 1.708 Since calculated t< t critical , we accept the null hypothesis that the first method is significantly superior to the second.

One we have our estimate for population variance we can then use it to determine standard error of the difference between two sample

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Exercises 1. A consumer research organization routinely selects several car models each year and evaluates their fuel efficiency. In this years study of two small cars it was found the average mileage for 12 cars of brand A was 27.2km/litre with a standard deviation of 3.8litres. 9 brand B cars were tested and they averaged 32.1km per litre. With a standard deviation of 4.3 km per litre. At a =.01 should the survey conclude that brand a cars have lower mileage than brand B cars? 2. Connie Rodrigues, the Dean of Students at Mid State College, is wondering about grade distributions at the school. She has heard grumbling that the GPAs in the Business School are about 0.25 lower than those in the College of Arts and Sciences. A quick random sampling produced following GPAs.

Business: 2.86 2.77 3.18 2.80 3.14 2.87 3.19 3.24 2.91 3.00 Arts & Sciences 2.83 3.35 3.32 3.36 3.63 3.41 3.37 3.45 3.43. 3.44 3.17 3.26 3.18

RESEARCH METHODOLOGY

Do these data indicate that there is a factual basis for the grumbling? State and test appropriate hypotheses at = 0.02. 2. A credit-insurance organization has developed a new high-tech method of training new sales personnel. The company sampled 16 employees, who were trained the original way and found average daily sales to be $688 and the sample standard deviation was $32.63. They also sampled 11 employees who were trained using the new method and found average daily sales to be $706 and the sample standard deviation was $24. At = 0.05, can the company conclude that average daily sales have increased under the new plan? 3. To celebrate their first anniversary, Randy Nelson decided to buy diamond earrings for his wife Debbie. He was shown nine pairs with marquise gems weighing approximately 2 carats per pair. Because of differences in the colors and qualities of the stones, the prices varied from set to set. The average price was $2,990, and the sample standard deviation was $370. He also looked at six pairs with pear-shaped stones of the same 2-carat approximate weight. These earrings had an average price of $3,065, and standard deviation was $805. On the basis of this evidence, can Randy conclude (at a significance level of 0.05) that pear-shaped diamonds cost more on average, than marquise diamonds? References Levin and Rubin Statisitcs for Management Notes

146

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