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Five Steps of Hypothesis Testing

The basic logic of hypothesis testing is to prove or disprove the research question. By
only allowing an error of 5% or 1% and making correct decisions based on statistical
principles, the researcher can conclude that the result must be real if chance alone could
produce the same result only 5% of the time or less. These five steps consists of all the
decisions a researcher needs to make in order to answer any research question using an
inferntial statistical test.

1. STATING THE RESEARCH QUESTION.

The first step is to state the research problem in terms of a question that identifies the
population(s) of interest to the researcher, the parameter(s) of the variable under
investigation, and the hypothesized value of the parameter(s). This step makes the
researcher not only define what is to be tested but what variable will be used in sample
data collection. The type of variable (or combination of variables as in relationship type
research questions) whether categorical, discrete or continuous further defines the
statistical test which can be performed on the collected data set.
For example:
Is the mean first salary of a newly graduated student equal to \$30,000?
The population of interest is all students who have just graduated. The parameter of
interest is the mean and the variable salary is continuous. The hypothesized value of the
parameter, the mean, is \$30,000. Since the parameter is a population mean of a
continuous variable variable, this suggests a one sample test of a mean.

2. SPECIFY THE NULL AND ALTERNATIVE HYPOTHESES.

The second step is to state the research question in terms of a null hypothesis (H0) and a
alternative hypothesis (HA). The null hypothesis is the population parameter, =
\$30,000 (H0: = \$30,000). The alternative hypothesis is the population parameter does
not equal \$30,000 ( HA: NE \$30,000). This HA suggests a two-tailed test as NE
\$30,000 can be less than \$30,000 or more than \$30,000. Sometimes the alternative
hypothesis is stated in terms of a direction such as less than or greater than a value such at
\$30,000. A directional HA calls for a one-tailed test, in the direction stated in the HA.
The next part of step 2 is to select a significance level (Type I error) typically alpha is
used at the .05 or the .01 level. A good researcher will also not neglect Type II error. In
this step we are not only setting up our research question in terms of statistical
hypotheses, but we must evaluate whether all the assumptions appropriate for the
statistical test have been met.
Example:
H0: = \$30,000
HA: NE \$30,000 alpha=.05

Test assumptions are 1) the population is normally distributed or sample size is

approximately >=30 and 2) the sample we have used to collect the data was drawn
randomly from the population. If these test assumptions have not been meet, then data
collection should be reevaluated or continued under caution.

3. CALCULATE TEST STATISTIC.

The third step is to calculate a statistic analogous to the parameter specified by the null
hypothesis. If the null hypothesis is defined by the parameter , then the statistics
computed on our data set would be the mean (xbar) and the standard deviation (s). A
histogram of our sample data set gives us our best approximation of what we expect our
population distribution to look like.
Since the best estimate of is xbar, our sample mean, the test statistic is based on a
distribution of sample means, the sampling distribution of the mean, xbar, with n, sample
size, equal to the number of data values used to compute xbar. We have hypothesized
from the research question the mean of this distribution and want to see if our sample
mean is close to this value. To determine where our sample mean fits on this sampling
distribution, we convert our sample mean, xbar, to a z-score. Thus the test statistic would
be :
z = xbar- (hypothesized)
standard error of xbar
The standard error of xbar (point estimate) is s, the sample standard deviation, divided by
square root of n, the sample size since the population standard deviation is unknown.
Example:
Suppose we randomly sampled 100 high school seniors and determined their salary of
their first job. The sample mean salary, xbar, was \$29,000 with a standard deviation of
\$6,000. Since sample size is >30, we don't have to worry about whether the population is
normally distributed (Central Limit Theorem). The test statistic would be:
z = \$29,000 - \$30,000 = -\$1,000 = -1.667
\$6,000/sqrt(100)
\$600

4. COMPUTE PROBABILITY OF TEST STATISTIC OR REJECTION

REGION.
The fourth step is to calculate the probability value (often called the p-value) which is the
probability of the test statistic for both tails since this this two-tailed test. The
probability value computed in this step is compared with the significance level selected in
step 2. If the probability is less than or equal to the significance level, then the null
hypothesis is rejected. If the probability is greater than the significance level then the
null hypothesis is not rejected. When the null hypothesis is rejected, the outcome is said
to be "statistically significant"; when the null hypothesis is not rejected then the outcome
is said be "not statistically significant." If the outcome is statistically significant, then the
null hypothesis is rejected in favor of the alternative hypothesis.

Example:

P(z> 1.667) =.048 + P(z< -1.667)=.048, the p-value

is .048+.048=.096
Since this value is greater than alpha=.05 selected when we set up out hypotheses, we
accept the null hypothesis, H0: = \$30,000.
If we wish to use a rejection region of alpha=.05 (.025 in each tail) to determine if we
accept or reject the null hypothesis, the cut-off z-score would be -1.96 and 1.96. If our
test statistic is >=1.96 or <= -1.96, then we would reject the null hypothesis at alpha=.05.
We can say that our test statistic (transformed into a z-score) is in the rejection region. In
this example, our test statistic, z=-1.667 for our test statistic does not fall in the rejection
region (sometimes called the acceptance region), so we must accept the null hypothesis.

5. STATE CONCLUSIONS.
The fifth and final step is to describe the results and state correct statistical conclusions in
an understandable way. The conclusions consists of two statments-one describing the
results of the null hypothesis and the other describing the results of the alternative
hypothesis. The first statement should state as to whether we accepted or rejected the null
hypothesis and for what value of alpha or p-value for our test statistic. The second
statement should answer the research question proposed in step 1 stating the sample
statistic collected which estimated the parameter we hypothesized.
Example:
Accept the null hypothesis at alpha=.05 or p-value of .096. Based on a sample mean of
\$25,000, the mean salary of a newly graduated student does not equal \$30,000.