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PGDM TERM I

FACULTY: ROHIT R. MUTKEKAR

*Disclaimer:

Course Docket will help you for quick reference and provides fundamental inputs,

hence cannot be substitute for text book/reference books

1|Page

Course Docket

Subject: Managerial Statistics

Correlation Analysis

Introduction

Classification Correlation

o Positive/Negative/Zero Correlation

o Simple/Multiple/Partial Correlation

o Linear/Non-Linear Correlation

Degree of Correlation

o Scatter Diagram Method

o Karl Pearson Method

o Spearmens Rank Correlation Method

Properties of Correlation

1. The following data provides details regarding sales and net profit for some of the top auto

makers during the quarter July-September 2006. Find the co-efficient of correlation using

an appropriate method and interpret the result.

Company

Tata Motors

(Rs. Crores)

6484.8

(Rs. Crores)

466

Hero Honda

2196.5

224.2

Bajaj Auto

2444.7

345.4

TVS Motor

1032.9

35.1

Bharat Forge

461.6

63.4

Ashok Leyland

1635.8

94.7

M&M

2365.5

200.6

Maruti Udyog

3426.5

315.7

2|Page

2. The following are the monthly figures of advertising expenditures and sales of a firm. It is

generally found that the advertising expenditures has an impact on sales. Determine the

co-efficient of correlation for the data provided using rank correlation method.

Month

Sales (Rs000)

Jan

50

1200

Feb

60

1500

March

90

1600

April

70

2000

May

120

2200

June

150

2400

July

140

2500

Aug

160

2600

Sept

190

2800

Oct

170

2900

Nov

200

3100

Dec

250

3900

3. Find the co-efficient of correlation between the two kinds of assessment of postgraduate

students performance in a college using the rank correlation method.

Assessment Marks

3|Page

Name

Internal

External

51

50

63

72

73

74

46

50

50

58

60

66

47

50

36

30

60

35

o For Karl Pearsons Method

o For Spearmens Rank Method

Assignment 1

1. Calculate the co-efficient of correlation for the original data given in Example 1 using

Karl Pearsons method. Determine the amount of variation in the result as compared to

the round of values. What can you conclude from this exercise?

2. A group of students of management programme at a certain institute were selected at

random. Their IQ and the marks obtained by them in the paper on decision science were

recorded. The details are as follows

IQ

Marks

Scored

120

85

110

80

130

90

115

88

125

92

120

87

Calculate co-efficient of correlation using Karl Pearsons and Spearmens Rank Method

and test for statistical significance in both the cases at 5% l.o.s.

3. Given below is the data about revenues and profit after tax for the quarter JulySeptember 2007 of some cement companies. Compute the co-efficient of correlation

using appropriate method and interpret the result. Also test the statistical significance at

1%.

Company

(Rs Crores)

(Rs Crores)

ACC

13

2.5

Ambuja

21

3.2

Ultratech

10

2.6

Shree

9

1.4

India

5

1.1

Bagalkot

3

0.8

4|Page

Regression Analysis

Introduction

Types of Regression

o Simple Regression

o Multiple Regression

Simple Linear Regression Analysis using Least Squares Method

o Examples on Simple Regression Analysis using Least Squares Method

1. A group of students of management programme at a certain institute were selected at

random. Their IQ and the marks obtained by them in the paper on decision science were

recorded. The details are as follows

IQ

Marks

Scored

120

85

110

80

130

90

115

88

125

92

120

87

Fit a regression equation and interpret the result so obtained.

2. A national level organization wishes to prepare a manpower plan based on the ever

growing sales offices in the country. Data pertaining to manpower and the number of sales

offices for previous is given belowManpower

370

386

443

499

528

616

Sales Offices

22

25

28

31

33

38

Fit a regression model for the given data and estimate the manpower required if the

organization targets to have 43 sales offices at the end of 2015.

5|Page

company.

Training (hrs.)

20

5

10

13

12

44

22

25

32

27

Fit a regression model and determine the weekly sales that is likely to be attained by a

salesman who is given 16 hours of training.

Regression Co-efficients

Co-efficient of Determination

Introduction

General form of Multiple Regression Model

Standard Error for Multiple Regression Model

1. Fit a regression model for the following data and interpret the result

Sales

(Rs.Lakh)

100

80

60

120

150

90

70

130

6|Page

Adv Expenses

(Rs000)

40

30

20

50

60

40

20

60

Selling

Offices

10

10

7

15

20

12

8

14

2. The owner of a chain of the stores wishes to forecast net profit with the help of next years

projected sales of food and non-food items. The data about the current years sales of food

items, sales of non-food items as also net profit for all the ten stores are available as followsNet Profit

(Rs.Cr)

5.6

4.7

5.4

5.5

5.1

6.8

5.8

8.2

5.8

6.2

Sales of Food

Items (Rs.Cr)

20

15

18

20

16

25

22

30

24

25

(Rs.Cr)

5

5

6

5

6

6

4

7

3

4

Multicollinearity in Multiple Regression

Selection of Independent Variables in a Regression Model

Assignment 2

1. For the following data fit regression equations ofi.

Net Profit on Net Sales

ii.

P/E ratio on Net Sales

For the group of these companies

Name of the

Net Sales(Rs. Cr) Net Profit (Rs. Cr)

P/E Ratio

Company

(Sept, 2005)

(Sept, 2005)

(31st Oct, 2005)

Infosys

7836

2170.9

32

Wipro

8051

1831.4

30

Bharti

8211

1655.8

31

Hero Honda

9771

1753.5

128

ITC

8086

868.4

16

Satyam

8422

2351.3

20

HDFC

3996

844.8

23

Tata Motors

18368

1314.9

14

Siemens

2753

254.7

38

2

Interpret the result in terms of standard error, R and significance of regression model.

7|Page

2. A company wants to assess the impact of R&D expenditure (Rs. Cr) on Annual profits

(Rs. Cr). The following table give information for the past 8 years.

Year R&D expenditure Annual profits

2006

9

45

2007

7

42

2008

5

41

2009

10

60

2010

4

30

2011

5

34

2012

3

25

2013

2

20

Fit a regression model. Interpret the result in terms of standard error, R2 and significance

of regression model.

3. Ashwin, owner of a business unit, is concerned about the sales pattern of his product. He

realizes that there are many factors that might help explain sales, but believes that

advertising and prices are major determinants. He has collected data from the past

records which are as followsSales (unit sold)

37

65

75

87

22

29

Advertising (No of ads) 07

10

14

17

13

10

Price (Rs000)

129 115 140 130 145 140

Fit a regression model. Interpret the result in terms of standard error, R2 and significance

of regression model.

8|Page

Introduction

Parameter

Statistic

Sample Space

Sampling Distribution

Standard Error

Testing of Hypothesis

9|Page

Hypothesis

Statistical Hypothesis

o Simple Hypothesis

o Composite Hypothesis

Null Hypothesis

Alternative Hypothesis

Test Statistic

Null Distribution

Critical (Rejection) Region

Acceptance Region

Errors in Hypothesis Testing

Actual Fact

Decision based on

sample

observation

H0 is true

Accept H0

H0 is true

Reject H0

H0 is false

Accept H0

H0 is false

Reject H0

Type I Error

Type II Error

Size of the test (Level of Significance)

Power of the test

One Tail Test

Two Tail Test

Procedure in Hypothesis Testing

o Formulation of Hypothesis

o Set up a suitable significance level

o Select the test criterion

o Computation

o Decision making

Inference

Error

Correct Decision

Incorrect Decision

Incorrect Decision

Correct Decision

-Type I

Type II

--

Z-Test for Single Mean (Theory)

Here the null hypothesis is given by,

H0: = 0

For the above null hypothesis, we may have any one of the following alternatives,

a) H1: 0 (Two tail test)

b) H1: > 0 (One tail test Upper)

c) H1: < 0 (One tail test Lower)

Now the test statistic under H0 is given by,

0

=

~ (0,1)

0 denotes standard value at which the population mean is tested

denotes population standard deviation

denotes sample size

(Noted: If is not specified then we need to use the sample standard deviations)

Decision Making

a) If we are testing H0: = 0 vs H1: 0 at level of significance, then we can reject

H0 if is lying outside the interval (2 , +2 )

b) If we are testing H0: = 0 vs H1: > 0 at level of significance, then we can reject

H0 if >

c) If we are testing H0: = 0 vs H1: < 0 at level of significance, then we can reject

H0 if < -

Here and 2 are Normal Table (Z) values at level of significance

Z-Test for Two Means (Theory)

Here the null hypothesis is given by,

H0: 1 = 2

For the above null hypothesis, we may have any one of the following alternatives,

a) H1: 1 2 (Two tail test)

b) H1: 1 > 2 (One tail test Upper)

c) H1: 1 < 2 (One tail test Lower)

Now the test statistic under H0 is given by,

1 2

=

~ (0,1)

1 2 2 2

+

1

10 | P a g e

2 denotes sample mean for a sample of size 2 from population 2

1 denotes population standard deviation from population 1

2 denotes population standard deviation from population 2

(Noted: If , is not specified then we need to use the sample standard deviation , )

Decision Making

a) If we are testing H0: 1 = 2 vs H1: 1 2 at level of significance then, we can reject

H0 if is lying outside the interval (2 , +2 )

b) If we are testing H0:1 = 2 vs H1: 1 > 2 at level of significance then, we can reject

H0 if >

c) If we are testing H0: 1 = 2 vs H1: 1 < 2 at level of significance, then we can reject

H0 if < -

o Examples on Z-Test (Mean)

1. An aircraft manufacturer needs to buy aluminium sheets of 0.05 inch in thickness. Thinner

sheets would not be appropriate and thicker sheets would be too heavy. The aircraft

manufacturer takes a random sample of 100 sheets and finds that their average thickness is

0.048 inch and their standard deviation is 0.01 inch. Should the aircraft manufacturer by the

aluminium sheets from the supplier?

2. A company manufacturing automobile tyres finds that the tyre life is normally distributed with

mean 40000 kms and standard deviation of 3000 kms. It is believed that a change in the

production process will result in a better product and the company goes ahead in adopting the

new process. As a pilot study 100 new tyres are randomly selected from the lot and tested.

From the test result it is found that the average life of these new tyres is 40900 kms. Can it be

concluded that the new tyres are significantly better than the old ones? Test at 1% l.o.s.

3. It has been found from experience that the average tensile strength of an alloy is 500 pounds

with standard deviation of 40 pounds. From the supplies, received during the current month,

a sample of 50 units were tested which showed an average tensile strength of 450 pounds. Can

we conclude that the alloy supplied is inferior?

4. A potential buyer wants to decide which of the two brands of electric bulbs he should buy as

he wants to buy them in bulk. As a specimen, he buys 100 bulbs of each of the two brands

A and B. On testing these bulbs, he finds that brand A has mean life of 1200 hours with

standard deviation 50 hours and brand B has mean life of 1150 hours with standard deviation

40 hours. Do the two brands differ significantly in terms of average life span? Test at 2% l.o.s.

11 | P a g e

5. An automobile company is interested in testing the average mileage given by one of the car

brand in two different cities i.e. Delhi and Mumbai. The company surveyed 100 car owners in

Delhi and found the average mileage is 12 kms and it surveyed 150 owners in Mumbai and

found the average mileage is 12.5 kms. The standard deviation for mileage of this brand of car

is known to be 0.9 kms. Can we conclude that the cars gives better average in Mumbai as

compared to Delhi? Test at 5% l.o.s.

Examples on Z test using MS Excel

1. A business school in its advertisement claims that the average salary of its graduates in a

particular lean year is at par with the average salaries offered at the top five business schools.

A sample of 35 graduates, from the business school whose claim was to be verified, was taken

at random. The average salary offered at the top five business schools in that year was given

as Rs.750000. Test the validity of the claim.

Student

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

12 | P a g e

Salary(000's)

750

600

600

650

700

780

860

810

780

670

690

550

610

715

755

770

680

670

740

760

775

845

870

640

690

715

630

685

780

635

31

32

33

34

35

770

665

780

550

620

2. A large organization produces electric light bulbs in each of its two factories (A and B). It is

suspected that the quality of production from factory A is better than factory B. To test this

assertion the organization collets samples from factory A and B, and measures how long each

light bulb works (in hours) before it fails (relevant data is given below). Both population

variances are known i.e. Var(A)=52783 and Var(B)=61560. Test the assertion at 5% l.o.s.

Factory A

Factory B

900

1052

1276

947

1421

886

1014

788

1246

1188

1507

928

975

983

1177

970

1246

766

875

1369

816

737

983

1114

1119

354

988

1347

1137

1062

1227

756

858

1052

941

754

1299

990

1110

950

929

783

843

816

1156

658

867

504

1454

1076

1403

500

1165

1025

1653

649

1288

1166

1187

498

945

1002

13 | P a g e

Here the null hypothesis is given by,

H0: = 0

For the above null hypothesis, we may have any one of the following alternatives,

a) H1: 0 (Two tail test)

b) H1: > 0 (One tail test Upper)

c) H1: < 0 (One tail test Lower)

Now the test statistic under H0 is given by,

0

=

~ (0,1)

0

0

0 standard value at which the population proportion P is tested

0 = 1 0

denotes sample size

Decision Making

a) If we are testing H0: = 0 vs H1: 0 at level of significance then we can reject

H0 if is lying outside the interval (2 , +2 )

b) If we are testing H0: = 0 vs H1: > 0 at level of significance then we can reject

H0 if >

c) If we are testing H0: = 0 vs H1: < 0 at level of significance then we can reject

H0 if < -

Z-Test for Two Proportions (Theory)

Here the null hypothesis is given by,

H0: 1 = 2

For the above null hypothesis, we may have any one of the following alternatives,

a) H1: 1 2 (Two tail test)

b) H1: 1 > 2 (One tail test Upper)

c) H1: 1 < 2 (One tail test Lower)

Now the test statistic under H0 is given by,

1 2

=

~ (0,1)

1

1

( + )

.

.

Where =

1

2

1 1 +2 2

1 +2

and = 1

2 denotes sample proportion for a sample of size 2 from population 2

1 denotes population proportion for population 1

2 denotes population proportion for population 2

14 | P a g e

Decision Making

a) If we are testing H0: 1 = 2 vs H1: 1 2 at level of significance then we can reject

H0 if is lying outside the interval (2 , +2 )

b) If we are testing H0:1 = 2 vs H1: 1 > 2 at level of significance then we can reject

H0 if >

c) If we are testing H0: 1 = 2 vs H1: 1 < 2 at level of significance then we can reject

H0 if < -

o Examples on Z-Test (Proportion)

1. It is known from the past data that 10% of the families in a certain locality subscribe to a

periodical called Outlook. Of late, there has been some apprehension that the subscription rate

has declined. In order to test whether there has been a decline, a random sample of 100 families

were surveyed from the locality and it was found that 7 families did subscribe for Outlook.

Can it be concluded that the subscription rate has really declined? Test at 5% l.o.s.

2. The owner of a departmental stores claims that majority of his customers use credit/debit card

as their payment option. To verify the claim made, 800 customers were randomly observed

during the given time and it was found that 420 made payment using credit/debit card. Discuss

whether the information supports the view and test the same at 1% l.o.s.

3. A cable TV operator claims that 50% of the homes in a city have opted for his services. Before

sponsoring advertisements on the local cable channel, a firm conducted a survey and found

that 280 homes out of 600 to have cable TV service provided by the operator. On this basis of

the data can we accept the claim made by the cable operator? Test at 1% l.o.s.

4. A company is considering two different ads for promotion of a new product. After watching

both the ads, the management believes that advertisement A is more effective than

advertisement B. Two test market areas with virtually identical consumer characteristics are

selected. Advertisement A is used in one area and B in another. In a random sample of 60

customers who saw advertisement A, 18 tried the product and similarly a random sample of

100 customers who saw advertisement B, 22 tried the product. Does this indicate that

advertisement A is more effective than advertisement B, test at 5% l.o.s.

5. You obtain a large number of components to an identical specification from 2 sources. You

notice that some of the components are from the suppliers own plant at Pune and some are

from the plant at Bangalore. You would like to know whether the proportion of defective

components are the same or there is a difference between them. For this, you take a random

sample of 600 components from each plant and find the sample proportion of defective

components as 0.015 and 0.017 respectively. Test at 1% l.o.s., whether the proportion of

defectives differ significantly with respect to these two plants.

15 | P a g e

t-Test for Single Mean (Theory)

Here the null hypothesis is given by,

H0: = 0

For the above null hypothesis, we may have any one of the following alternatives,

a) H1: 0 (Two tail test)

b) H1: > 0 (One tail test Upper)

c) H1: < 0 (One tail test Lower)

Now the test statistic under H0 is given by,

0

=

~ ( 1)degree of freedom

1

denotes sample mean

0 denotes standard value at which the population mean is tested

denotes sample standard deviation

denotes sample size

Decision Making

a) If we are testing H0: = 0 vs H1: 0 at level of significance then, we can reject

H0 if is lying outside the interval (2 , +2 )

b) If we are testing H0: = 0 vs H1: > 0 at level of significance then, we can reject

H0 if >

c) If we are testing H0: = 0 vs H1: < 0 at level of significance then, we can reject

H0 if < -

Here and 2 are t distribution table values at level of significance

t-Test for Two Means (Theory)

Here the null hypothesis is given by,

H0: 1 = 2

For the above null hypothesis, we may have any one of the following alternatives,

a) H1: 1 2 (Two tail test)

b) H1: 1 > 2 (One tail test Upper)

c) H1: 1 < 2 (One tail test Lower)

1 2

=

~ (1 + 2 2)degree of freedom

1 1 2 + 2 2 2 1 + 2

+ 2 .( . )

1

16 | P a g e

2 denotes sample mean for a sample of size 2 from population 2

1 denotes sample standard deviation for a sample of size 1 from population 1

2 denotes sample standard deviation for a sample of size 2 from population 2

Decision Making

a) If we are testing H0: 1 = 2 vs H1: 1 2 at level of significance then we can reject

H0 if is lying outside the interval (2 , +2 )

b) If we are testing H0:1 = 2 vs H1: 1 > 2 at level of significance then we can reject

H0 if >

c) If we are testing H0: 1 = 2 vs H1: 1 < 2 at level of significance then we can reject

H0 if < -

o Examples on t-Test (Mean)

1. The mean nicotine content of a brand of cigarette is 20.0 mgs. A new process is proposed to

lower the nicotine content without affecting the quality. To test the new process, 16 cigarettes

are selected at random from the output obtained from the test plant. The sample mean nicotine

content is found to be 18.5 mg with standard deviation of 2 mg. Is the claim for the new

process justified? Test at 5% l.o.s.

2. A car manufacturer claims that its new car gives a mileage of atleast 15 kms/litre of petrol. A

sample of 10 cars is taken at random, and their mileage recorded are as follows:

16.2, 15.7, 16.3, 16.0, 15.8, 15.7, 15.6, 15.6, 15.7, 15.4

Is there any statistical evidence to support the claim of the manufacturer about the mileage?

3. A local car dealer wants to know if the purchasing habits of a buyer buying extras have

changed. He is particularly interested in male buyers. Based upon the previous experience he

finds that the average of extras purchased is $2000. As a test he collects details of extras

purchased by the last 7 male customers i.e. ($) 2300, 2386, 1920, 1578, 3065, 2312 and 1790.

Test whether the extras purchased on average has changed.

17 | P a g e

4. Two types of drugs viz. A and B were used on 5 and 7 patients respectively for reducing their

weight. Drug A was imported and drug B was indigenous. The decrease in the weight after

using the drug for six months was as follows:

Drug A

10

12

13

11

14

Drug B

8

9

12

14

15

10

9

Test whether there is any significant difference in the efficacy of the two drugs with respect

to average weight lost.

5. A physical instructor has an opinion that students who are associated with athletics are taller

in height as compared to those who do not. Among 16 students who were selected at random

it was found that 6 students were associated with athletics and the remaining were not

associated with athletics. Their heights recorded are as belowHeight (cms)

Athletes

Non-Athletes

176

172

173

167

171

175

172

169

177

169

169

172

174

170

167

170

Test at 1 % l.o.s whether the opinion of the physical instructor is valid?

18 | P a g e

Here the null hypothesis is given by,

H0: There is no significant difference after as compared to before (1 = 2 )

For the above null hypothesis have the following alternative,

H1: There is a significant difference after as compared to before

(1 > 2 1 < 2 )

Now the test statistic under H0 is given by,

=

~ ( 1)degree of freedom

1

Where, =

and =

D the standard value at which the hypothesis is tested

(Note: If D is not specified then take it as zero)

Decision Making

a) If we are testing H0:1 = 2 vs H1: 1 > 2 at level of significance then we can reject

H0 if >

b) If we are testing H0: 1 = 2 vs H1: 1 < 2 at level of significance then we can reject

H0 if < -

o Examples on Paired t-test

6. Super Slim is advertising a weight reduction programme which claims that more than 10 lbs

weight loss is possible in first 30 days. Twenty six subjects were independently and randomly

selected for study, and their weights before and after the weight loss programme were

recorded. The data is as followWeight (lbs)

Before After

170

170

159

153

162

129

153

143

177

137

167

134

158

133

178

128

141

152

163

142

19 | P a g e

154

140

159

154

159

143

138

147

161

142

156

149

165

136

158

154

151

140

165

145

155

125

154

140

147

125

156

141

155

146

169

135

Test the claim at 5% l.o.s.

7. A company has reorganized its sales department. The following data shows its weekly sales

(in Rs lakh) before and after reorganization. The period for comparison is taken from Jan to

March in two successive yearsWeekly Sales

Before After

12

16

15

17

13

14

11

13

17

15

15

14

10

12

11

11

18

17

19

22

Comment and draw valid conclusion.

20 | P a g e

8. A local pizza restaurant and a local branch of a national chain are located across the street

from a college campus. The local pizza restaurant advertises that it delivers to the dormitories

faster than the national chain. In order to determine whether this advertisement is valid, you

and some of friends have decided to order pizzas from both the outlets at different time. The

delivery times in minutes are as given belowLocal

Chain

16.8

22

11.7

15.2

15.6

18.7

16.7

15.6

17.5

20.8

18.1

19.5

14.1

17

21.8

19.5

13.9

16.5

20.8

24

Test the claim at 1% l.o.s.

Assignment 3

1. The cinema-goers were 800 people out of a sample of 1000 persons during the period of a

fortnight in a town where no TV programme was aired. Similarly cinema-goers were 700

people out of a sample of 2800 persons during a fortnight where a TV programme was aired.

Do you think that there has been a significant decrease in proportion of cinema-goers due to

the introduction of TV programmes?

2. An insurance agent has claimed that the average age of policy holders who insured through

him is less than the average for all agents which he estimates as 30 years. A random sample

of 100 policy holders who have insured through him gave the following age distributionAge in years No of persons insured

16 20

12

21 25

22

26 30

20

31 35

30

36 40

16

Test the claim at 1% l.o.s.

21 | P a g e

3. Two salesmen A and B are working in a certain district. From a sample survey conducted by

the head office, the following results were obtained. State whether there is any significant

difference in the average sales between the two salesmen?

A

B

Number of Sales

20

15

Average Sales (in Rs000)

170

200

Standard Deviation (in Rs000)

20

25

4. Ten persons were appointed in officer cadre in an office. Their performance was evaluated by

giving a test and the marks were recorded out of 100. They were given two months training

and another test was held and the marks were recorded out of 100. The details are as belowEmployees Marks Before Training Marks After Training

A

80

84

B

76

70

C

92

96

D

60

80

E

70

70

F

56

52

G

74

84

H

56

72

I

70

72

J

56

50

Can it be conclude that the employees have benefited by the training?

5. As per the ET-TNS consumer confidence survey, published in Economic Times dt. 10th

November, 2006, the consumer confidence indices for some of the cities changed from

December 2005 to September 2006, as follows. Is the difference significant?

City

December 2005 September 2006

Delhi

106

83

Jaipur

117

142

Mumbai

112

126

Ahmedabad

123

108

Kolkota

83

84

Bhubaneshwar

137

144

Bangalore

137

138

Kochi

113

134

22 | P a g e

Here the null hypothesis is given by,

H0: The two attributes are independent

For the above null hypothesis have the following alternative,

H1: The two attributes are dependent

Here the observed frequencies are given in tabular form called Contingency table.

We need to calculate the expected frequencies using the formula,

=

( )2

2

=

~ 2 [( 1)x(c 1)]degree of freedom

Where,

O denotes Observed Frequencies

E denotes Expected Frequencies

r denotes number of rows

c denotes number of columns

Decision Making

We are testing H0 vs H1 at level of significance, where we can reject H0 if 2 > 2

2 denotes chi square table value at level of significance

1. The marketing agency gives the following information about the age group of the sample

informants and their liking for a particular model of scooter which a company plans to

introduce:

Age group of the informants

Below 20 20-39

40-59 Total

Liked

125

420

60

605

Disliked

75

220

100

395

Total

200

640

160

1000

On the basis of the above data can it be concluded that the model appeal is independent of the

age group of the informants?

23 | P a g e

2. 1000 employees at a company are graded according to their performance and economic

conditions. Test at 1 % level of significance whether there is any association between the

performance and economic condition of the employees.

Performance

High Medium Low Total

Economic

Condition

Total

Rich

Poor

160

140

300

300

100

400

140

160

300

600

400

1000

3. In order to test whether attributes smoking and literacy are independent, a survey of 210

literates and 250 illiterates was conducted. The result of the survey is given belowSmoker

Non

Total

Smoker

Education Literate

13

197

210

Background Illiterate

46

204

250

Total

59

401

460

Test at 1 % level of significance whether there is any association between the attributes at

5% l.o.s?

4. Suppose a university sampled 485 of its students to determine whether males and females

differed in preference for the five courses offered. The data obtained is tabulated as belowCourses offered

Gender

Male

Female

Science

45

86

Engineering

52

67

Medicine

50

19

Management

50

32

Arts

69

15

Test whether there exists any association between the choice of the course and the gender of

the respondent.

24 | P a g e

Here the null hypothesis is given by,

H0: The theoretical and observed frequency distribution is a good fit.

For the above null hypothesis have the following alternative,

H1: The theoretical and observed frequency distribution is not a good fit.

Now the test statistic under H0 is given by,

( )2

2 =

~ 2 (n k 1)degree of freedom

Where,

O denotes Observed Frequencies

E denotes Expected Frequencies

k denotes Additional Constraints

Decision Making

We are testing H0 Vs H1 at level of significance, where we can reject H0 if 2 > 2

2 denotes chi-square table value at level of significance

(Note: If the expected frequencies are found to be less than 5 then it should be pooled with either

the preceding or succeeding frequency term)

o Examples on Chi-Square Test for Independence of Attributes

1. A survey of 64 families with 3 children each is conducted and the number of male children

in each family is noted. The results are tabulated as followsNo of Male Children

0

1

2

3

Total

No of Families

6

19

29

10

64

Test whether male and female children are equi-probable?

2. The following data relates to the number of mistakes on each page of a book containing 180

pages.

No of Mistakes / page

0

1

2

3

4

5

Total

No of Pages

130

32

15

2

1

0

180

Test whether Poisson distribution is a good fit to the observed distribution.

3. A sample analysis of examination results of 200 MBAs was made. It was found that 46

students had failed, 68 students secured pass class, 62 secured second class and the remaining

secured first class. Are these figures commensurate with the general examination result that is

in the ratio of 2:3:3:2 for various categories respectively? Test at 1% l.o.s.

4. The divisional manager of a retail chain believes that average number of customers entering

each of the five stores in his division weekly is the same. In a given week, the manager reports

the following number of customers in the stores as: 3000, 2960, 3100, 2780, 3160. Test the

divisional managers belief at 5% l.o.s.

25 | P a g e

Assignment 4

1. A trainee risk manager for an investment bank has been told that the level of risk is related to

the industry type. For the sample data presented in the contingency table analyze whether

perceived risk is dependent upon the type of industry identified?

Industry Class

Manufacturing

Retail

Financial

Level of

Risk

Low

Moderate

High

81

46

22

38

42

26

16

33

29

2. An employment agency has recently implemented a new training programme to develop the

interview skills of potential job applicants. Based upon the collected data can we say

confidently that the data can be modelled using binomial distribution? (Test at 1% l.o.s).

No of Interview Successes

0

1

2

3

Frequency

78

143

43

13

3. A motorway safety officer believes that the number of accidents per week occurring on a

stretch of motorway can be modelled using Poisson distribution. A sample data collect for the

study is given belowNo of accidents/week

0

1

2

3

4

5

6

7

Frequency

10

12

12

9

5

3

1

0

Test whether Poisson distribution is a good fit to the observed distribution.

4. A university has recently set up a satellite department within a local college of higher

education. The university claims that 35%, 26%, 25% and 14% of the undergraduate students

are in department A, B, C and D respectively. A random sample of 320 students finds the

following number of students in department A-D: 132, 89, 64 and 35 respectively. Test the

claim at 1% l.o.s.

26 | P a g e

Introduction

Here the null hypothesis is given by

H0: There is no significant difference between the population means

And the corresponding alternative hypothesis is given by

H1: There is a significant difference between atleast one pair of population means

Here the calculation is done using ANOVA table called One Way ANOVA Table

Sources of

Sum of

Degree of

Mean Sum of

F-Ratio

Variation

Squares

Freedom

Squares

(SS)

(MSS)

Between the

SSB

k-1

MSB=SSB/k-1

MSB/MSE

Sample

Within the

SSE

n-k

MSE=SSE/n-k

Sample

Total Variation

SST

n-1

Now the test statistics is given by =

~ ( 1, )

Here,

n denotes total number of observations

k denotes number of entities under study

Decision Making

We are testing H0 Vs H1 at level of significance, where we can reject H0 if >

denotes F table value at level of significance

o Examples on One Way ANOVA

1. To assess the significance of possible variation in performance of a company (which has

four plants in different cities) was conducted and the results are given below.

Plant A Plant B Plant C Plant D

08

12

18

13

10

11

12

09

12

09

16

12

08

14

06

16

07

04

08

15

Carry out analysis of variance and interpret the result.

27 | P a g e

2. The following table gives the yields on 15 sample plots under three varieties of seeds namely

A, B and C.

A: 20, 21, 23, 16, 20

B: 18, 20, 17, 15, 25

C: 25, 28, 22, 28, 32

Find out if the average yields of the land with different varieties of seed show significant

differences.

Theory

Here the null hypothesis are given by

H0R: There is no significant difference between the factors along the rows

H0C: There is no significant difference between the factors along the columns

And the corresponding alternative hypothesis is given by

H1R: There is a significant difference between the factors along the rows

H1C: There is a significant difference between the factors along the columns

Here the calculation is done using ANOVA table called Two Way ANOVA Table

Sources of

Sum of

Degree of

Mean Sum of

F-Ratio

Variation

Squares

Freedom

Squares

(SS)

(MSS)

Between the

SSR

r-1

MSR=SSR/r-1

MSR/MSE

Rows

Between the

SSC

c-1

MSC=SSC/c-1

MSC/MSE

Columns

Residual

SSE

(r-1)(c-1)

MSE=SSE/(r-1)(c-1)

Total Variation

SST

Now the test statistics is given by-

n-1

1 =

~ ( 1, (r 1)(c 1))

2 =

~ ( 1, (r 1)(c 1))

Here,

n denotes total number of observations (n=cr)

r denotes number of rows

c denotes number of columns

28 | P a g e

Decision Making

1. We are testing H0R Vs H1R at level of significance, where we can reject H0 if 1 >

1

1 denotes F table value at level of significance for (r-1,(r-1)(c-1))degree of freedom

2. We are testing H0C Vs H1C at level of significance, where we can reject H0 if 2 >

2

2 denotes F table value at level of significance for (c-1,(r-1)(c-1))degree of freedom

o Examples on Two Way Analysis of Variance (Two Way ANOVA) without Replication

3. A company has appointed four salesmen A, B, C and D and observed their sales in three

seasons summer, winter and monsoon. The figures (in Rs. Lakh) are given in the

following tableSalesmen

Seasons

A

B

C

D

Summer

36

36

21

35

Winter

28

29

31

32

Monsoon

26

28

29

29

Using 5% l.o.s, perform analysis of variance on the above data and interpret the results.

4. The following data represents the number of units of production per day turned out by

four different workers using five different machines:

Machine Type

Workers

A

B

C

D

E

I

4

5

3

7

6

II

5

7

7

4

5

III

7

6

7

8

8

IV

3

5

4

8

2

On the basis of the data given in the table, can it be concluded thati. The mean productivity is the same for different machines

ii. The workers dont differ with regard to productivity.

29 | P a g e

o Examples on Two Way Analysis of Variance (Two Way ANOVA) with Replication

5. The following data refers to the yields of rice on two plots each with combination of the

verity of rice and type of fertilizers

Fertilizer A

Fertilizer B

Fertilizer C

Fertilizer D

Verity 1

Verity 2

Verity 3

6

5

7

6

8

7

4

5

6

7

5

5

8

6

6

7

10

9

6

4

9

8

9

10

6. Reliable tyre dealer wishes to assess the quality of lives of three different brands of tyres

sold by it. It also wants to assess whether the lives of these tyres is the same for four brands

of cars on which they are been used. Thus, each brand of tyres was tested on each of the

four brands of cars. Further, the dealer wishes to ascertain the equality of lives for each

combination of brands of tyre and car. The mileage obtained are given as followsCar A

Car B

Car C

Car D

Tyre 1

Tyre 2

Tyre 3

32

31

33

31

38

37

38

39

32

30

31

33

30 | P a g e

30

29

28

30

39

40

41

39

33

32

30

31

34

33

36

35

40

41

42

43

40

42

41

40

36

38

39

40

41

39

40

42

45

43

42

46

Assignment 5

1. Three training methods were compared to see if they led to greater productivity after training.

The productivity measures for individuals trained by different methods are as below36

26

31

20

34

25

Method 1

40

29

38

32

39

34

Method 2

32

18

23

21

33

27

Method 3

At 1 % l.o.s test whether three training methods lead to different levels of productivity?

2.

The following table gives the data on the performance of three different detergents at three

water temperatures. The performance was obtained on the basis whiteness readings based

on specially designed equipment for nine loads of washingDetergent

Water Temp.

A

B

C

Cold Water

45

43

55

Warm Water

37

40

56

Hot Water

42

44

46

Analysis the above case using ANOVA at 5% l.o.s.

3. The manager of a bank in Mumbai is responsible for ATM operations in three areas in the

city, viz. Andheri, Vile Parle and Santa Cruz. When he took over the operations, he faced the

problem of cash running out from the ATM machines. To study the problem he collected data

from all the three areas to check whether ATMs in all three areas need equal amount of cash.

He also wanted to know whether ATMs at different locations needed the same amount of cash

or not. So he collected the following data about cash withdrawals(in Rs. Lakhs) during the

last four months which is tabulated as belowAreas

Locations

Station

Market

Bank

40

37

35

Andheri

39

39

34

41

37

38

39

36

32

38

36

34

Santa Cruz

42

37

35

40

34

33

39

35

34

38

39

35

Vile Parle

39

34

35

39

37

34

41

36

33

Analyze the above case at 1% l.o.s.

31 | P a g e

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