MMGT6012

Business Tools for Management

TOPIC 3: Differences & Relationships

Dr. Matthew Beck
ITLS, Business School

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 3. Differences & Relationships

Basic Hypotheses

Typically we have two hypotheses that we wish to test

Values in one variable are different to values in another:

– H0: There is no difference between the two values
– H1: There is a difference between the two values

Changes in one variable are related to changes in another:

– H0: There is no relationship between the two values
– H1: There is a relationship between the two values

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 3. Differences & Relationships

Basic Hypotheses

Examples:
– Does package colour influence the amount of goods purchased?
– Does average travel time differ across modes of transport?
– Do fluctuations in the exchange rate affect the price of crude oil?
– Is the cost of living in Sydney different to the cost of living in Melbourne?
– Is MMGT6012 attendance go up or down if it is sunny and warm?

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 3. Differences & Relationships

An Overview of Hypotheses

t-test Crosstab

Difference Relationship

F-test Correlation

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 3. Differences & Relationships

Avoiding Type I Errors

Remember that we want to avoid making a Type I error:

– Rejecting the null when the null is true

The power of hypothesis testing is that:

– We use statistics to calculate the probability of being wrong

In SPSS we look for the sig value:

– Also called alpha, level of significance, p-value, observed probability

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 3. Differences & Relationships

t-Tests

Used to test the difference between two means:

– H0: The two values are equal (i.e. no difference / not significant)
– H1: The two values are not equal (i.e. difference is significant)

Equal Same No No = Null

Difference

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 3. Differences & Relationships

One Sample t-Test

Difference between the mean and a given value:

– H0: The average distance Matt drives the golf ball is equal to 300m
– H1: The average distance Matt drives the golf ball doesn’t equal 300m

300

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 3. Differences & Relationships

Class Activity

http://www.pgatour.com/stats.html

One Sample t-Test Example:

– H0: The average driver distance on the PGA Tour = 300m
– H1: The average driver distance on the PGA Tour ≠ 300m

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 3. Differences & Relationships

Independent Sample t-Test

Difference between a mean from two different samples:

– H0: The average driver distance of Matt = average of Tiger Woods
– H1: The average driver distance of Matt ≠ average of Tiger Woods

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 3. Differences & Relationships

Class Activity

Independent Sample t-Test Example:

– H0: Average driver distance of users = other ball users
– H1: Average driver distance of users ≠ other ball users

Note there is an intermediate step:

– If variances are equal use t-test sig value in top row (sig > 0.05)
– If variances are not equal use t-test sig value in bottom row (sig < 0.05)

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 3. Differences & Relationships

Paired Sample t-Test

Difference between two means from the same sample:

– H0: The average distance Matt hits with Brand1 = Average of Brand2
– H1: The average distance Matt hits with Brand1 ≠ Average of Brand2

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 3. Differences & Relationships

Class Activity

Paired Sample t-Test Example:

– H0: % of drives on right of fairway = % on left of fairway
– H1: % of drives on right of fairway ≠ % on left of fairway

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 3. Differences & Relationships

F-Tests (Analysis of Variance – ANOVA)

Used to test the difference between three or more means:

– H0: Matt’s average score on Day1 = Day2 = Day3 = Day4
– H1: Matt’s average score on at least one day is different
– (In pro golf you play 4 rounds across 4 days; lowest total score wins)

The F tells us if a significant difference exists or not:

– To find where the differences are we need to calculate
– Tukey’s Honest Significant Difference (Tukey’s HSD)

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 3. Differences & Relationships

Class Activity

F-test (ANOVA) Example:

– H0: % of putts made from 3 feet = % from 5 feet = % from 10 feet
– H1: % of putts made from 3 feet ≠ % from 5 feet ≠ % from 10 feet

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 3. Differences & Relationships

Scatterplots

Easy way to get a powerful picture of potential relationships

– Plots values for one variable on Y and another on X
– Easily done in Excel (Insert > Charts > Scatter)

Club Head Speed vs Distance

112
110
108
106
104 What did I do
102 wrong!?!
100
98
96
94
220 240 260 280 300
Distance (m)
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 3. Differences & Relationships

Correlations

Tests the relationship between two continuous variables:

– H0: There is no relationship between how far Matt drives and his score
– H1: There is a relationship between how far Matt drives and his score

Can only test linear (straight line) relationships!

Need to test if data is Normal or not (skewness and kurtosis):

– If both variables are normal use Pearson Correlation
– If at least one is not normal use Spearman’s Rho

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 3. Differences & Relationships

Correlations

1) Examine the significance of the correlation statistic

2) Examine the sign of the correlation statistic:

– Is it positive or negative?

3) Examine the size of the correlation statistic:

– 0 = No relationship
– < 0.3 = weak
– 0.3 to 0.5 = mild
Absolute
– 0.5 to 0.7 = moderate Values
– > 0.7 = strong
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 Correlations

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 Correlations

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 Correlations

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 3. Differences & Relationships

Class Activity

Correlation Example:
– H0: There is no relationship between club head speed and driver distance
– H1: There is a relationship between club head speed and driver distance

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 3. Differences & Relationships

Crosstabulation

Also called a contingency table:

– Shows how often categories occurring at the same time
– Best to examine relationships between two variables at a time

Compares observed frequencies to expected:

– How often they should intersect (if not related) vs how often they do

Works best on variables with a small number of categories:

– Any continuous variable can be turned into categories

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 3. Differences & Relationships

Crosstabulation – Worked Example

Suppose I wanted to know when I play best:

– H0: There is no relationship between Matt’s performance and the weather
– H1: There is a relationship between Matt’s performance and the weather
Dependent (columns)
Good Poor
(below handicap) (above handicap)

Warm 57 23 80
Independent
(rows)
Cold 39 32 71

96 55
The University of Sydney 151 rounds in total Page 23
 3. Differences & Relationships

Crosstabulation – Worked Example

I played 151 rounds in total:

– 96 were good (64% of the time I played well)
– 55 were bad (36% of the time I played poorly)

Given I played 80 rounds in warm weather:

– How many of these rounds should be good if weather had no impact?
– How many of these rounds should be bad if weather had no impact?

Given I played 71 rounds in cold weather:

– How many of these rounds should be good if weather had no impact?
– How many of these rounds should be bad if weather had no impact?
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 3. Differences & Relationships

Crosstabulation – Worked Example

If the relationship was constant:

Dependent (columns)
Good Poor
(below handicap) (above handicap)

96 55
Warm 80 ∗ 80 ∗
Independent 151 151
(rows) 96 55
Cold 71 ∗ 71 ∗
151 151

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 3. Differences & Relationships

Crosstabulation – Worked Example

Would expect to see the same 64%/31% split of performance

Dependent (columns)
Good Poor
(below handicap) (above handicap)

Warm 51 29 80
Independent
(rows)
Cold 45 26 71

96 55
151 rounds in total
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 3. Differences & Relationships

Crosstabulation – Worked Example

Expected versus Actual (frequencies):

Dependent (columns)
Good Poor
(below handicap) (above handicap)

Warm 51 vs 57 29 vs 23
Independent
(rows)
Cold 45 vs 39 26 vs 32

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 3. Differences & Relationships

Crosstabulation – Worked Example

Expected versus Actual (percentages):

Dependent (columns)
Good Poor
(below handicap) (above handicap)

Warm 64% vs 71% 36% vs 29%

Independent
(rows)
Cold 64% vs 55% 36% vs 45%

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 3. Differences & Relationships

Crosstabulation – Worked Example

There is a noticeable difference:

– Actual performance ≠ expected performance
– If weather didn’t matter performance should be constant

Saying there is a difference is not enough:

– How likely is it that we can truly say weather affects performance?

( F − F ) 2
χ2 = ∑ o e with (r-1)*(c-1) degrees of freedom
Fe

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 3. Differences & Relationships

Crosstabulation – Worked Example

– The table tells us that the Chi-Square
value for (2-1)*(2*1) d.f. is 3.84
– We calculated value = 4.13
– Is this significant?

3.84

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 3. Differences & Relationships

Class Activity

Crosstab Example:
– H0: There is no relationship between ball choice and winning
– H1: There is a relationship between ball choice and winning

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 3. Differences & Relationships

Class Activity

1. Locate the Class Data – Clean.xlsx data file

2. On this data conduct each of the following tests:

– One Sample, Indep. Sample, Paired Sample, ANOVA, Crosstab, Correlation

3. For each slide be prepared to discuss:

– Your hypothesis and why you are testing it / why it is interesting
– The result of your test (do you reject or not reject the null and why)

4. Email to matthew.beck@sydney.edu.au
– GROUP NAME in subject line

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