CENTRAL LIMIT THEOREM

 States that the sampling distribution of the sample

means  approaches a normal distribution as the
sample size gets larger regardless of the shape of the
population distribution.
 Graphically speaking, the more times you roll the die,
the more likely the shape of the distribution of the
means would look like a normal distribution graph.
Understanding Hypothesis Testing
Hypothesis testing
 A decision-making process for evaluating claims
about a population based on the characteristics of a
sample purportedly coming from the population

Random variable representing Types of Hypotheses

x́−¿
1. Alternative Hypothesis
the sample mean of n  independently
 denoted by Ha , is a statement that there is a
drawn observation
difference between a parameter and a specific value,
μ− population mean or that there is a difference between two
σ −standard deviation parameters
n−Sample ¿¿ 2. Null Hypothesis
 denoted by H0 , is a statement that there is no
Point Estimate for the Population Mean difference between a parameter and a specific value,
or that there is no difference between two
Estimation parameters
 It is the process of determining parameter values.  H o :µ 1=µ2
Estimate
 Is a value or a range of values that approximate a Non-directional test “two-tailed test”
parameter. It is based on a sample statistics  A test of a statistical hypothesis, where the region of
computed from sample data rejection is on both sides of the sampling distribution
Types of Estimator Directional test “one-tailed”
Point Estimate  left-tailed or right-tailed
 It is a specific numerical value of a population  A test of a statistical hypothesis, where the region of
parameter. The sample mean (X̅) is the best point rejection is on only one side of the sampling
estimate of the population mean. distribution
 “The mean of the means is equal to the population
mean μ (read myu)” Hypothesis-Testing Common Phrases
 x́ x́ =μ  Null Hypothesis Alternative Hypothesis
Interval Estimate
 It is a range of values that may contain the parameter One-tailed Test Two-tailed Test
of a population.
Formula for standard deviation …is equal to ...is less (or greater) than ...is not equal to
2
∑ ( X − x́ )
s=
√
where:
n−1
...is the same as
... is above (or below)

...is higher (or lower) than

...is different from
...is not the same as

Σ = “sum of” ...is longer (or shorter) than

X = column mean
X̅ = overall mean ...is bigger (or smaller) than
n = number of cases
...has not changed from ...has increased (or reduced) from ...has changed from
Point Estimate for the Population Proportion
Interval Estimate
 It is a range of values that is used to estimate a
parameter
 Also called as “confidence interval”
Proportions
 It can be obtained from samples or populations
n= number of observations in a simple random sample.
P= population proportion.
number of desired outcomes
^p=
number of sample elements
For sample proportion
x
^p= ∧^q =1− ^p
n
X= is the number of sample elements that posses the
desired characteristics
n= is the sample size

Hypothesis Testing
Steps in Hypothesis Testing
DATA

STATE HYPOTHESIS

SELECT TEST STATISTIC

CALCULATE TEST STATISTIC

CONCLUDE HA IS TRUE
DO NOT REJECT HO STATISTICAL DECISION REJECT HO

CONCLUDE HO MAY BE TRUE

  The probability is found at the right tail of the  Profit & capital, Savings & expenditure, Blood
distribution pressure & age

 The probability is found at the left tail of the Correlation Analysis

distribution
  A statistical method used to determine whether
there is a relationship between two variables
 The probability is found on both tails of the
distribution  Data can be represented by the ordered pairs (x, y)
where x is the independent variable, and y is the
dependent variable.  
Types of Error
Four Possible Outcomes in Decision-Making Scatter Plot
DECISIONS ABOUT HO
REJECT HO ACCEPT HO   “Scatterplot, Scatter graph, or scatter diagram”
REALIT HO IS TRUE TYPE 1 ERROR CORRECT DECISION
Y  Used to determine if there is relationship between
HO IS FALSE CORRECT DECISION TYPE 2 ERROR the two variables

 A graphical representation 
Type I error
 Occurs when the researcher rejects a null hypothesis The relationship or correlation between two variables may
when it is true be described in terms of direction and strength
 The probability of committing a Type I error is called Direction of Correlation
the significance level (“alpha, α”)
1. Positive Correlation
Type II error 2. Negative Correlation
 Occurs when the researcher fails to reject a null 3. Zero Correlation
hypothesis that is false
 The probability of committing a Type II error is called
the beta (β)

ERROR IN TYPE PROBABILITY CORRECT TYPE PROBABILITY

DECISION DECISION
REJECT A I α ACCEPT A A 1- α
TRUE HO TRUE HO Positive Correlation
ACCEPT A II β REJECT A B 1- β
FALSE HO FALSE HO As x increases (or decreases), y tends to
increase (decrease)
Two-tailed Critical Values “Confidence Coefficients”

Negative Correlation
As x increases, y tends to decrease

 95% confidence level
 99% confidence level
Zero  Correlation
Exists when high values on one
variable correspond to either high or
-1.96 and +1.96
low values in the other variable
-2.58 and +2.58

Rejection Region “Critical Region”

Strength of Correlation 
Conducting the Hypothesis Test using the Traditional
 Moderate Positive Correlation
Method and P value method
 Strong Positive Correlation
“Significance Level”
 Perfect Positive correlation
 The probability of committing Type I error
 For any hypothesis test, P value = probability of 
 Moderate Negative Correlation
committing Type I error
 Strong Negative correlation 
 “0.05 or 0.01”
 No Correlation
Test Statistic

 It is a value used to determine the probability needed

in decision-making. The trend line is the line closest to the points. It tells the
direction of correlation (whether positive - trend line
One-population Test points to the right, or negative- trend line points to the
 “Significance test for a single mean” left)
 A test conducted on one sample purportedly coming
from a population with mean μ
Two cases to consider for testing the mean of a single
population:

1. The sample is large (n≥30). Thus, we can apply the

Central Limit Theorem and we use the normal curve
as a model.
2. When CLT is applied, sample standard deviation s
may be used as an estimate of the population
standard deviation when the value of σ is unknown.

Correlation Analysis

Bivariate Data

 Data that involve two variables

Pearson correlation coefficient
❖ “Pearson r”
❖ Karl Pearson
❖ It indicates the degree of relationship between two
variables
❖ It indicates the strength of correlation