Chapter 10 10b1

North Seattle Community College

Two-Sample Tests

BUS210 Two-Sample Tests

Business Statistics

Chapter 10 Population Means Population Population

Proportions Variances
Fundamentals of Independent Related
Hypothesis Testing: Samples Samples
Two-Sample Tests
Part B

BUS210: Business Statistics Two-Sample Hypothesis Tests- 2

Two-Sample Tests Two Population Proportions

Goal: Test hypothesis or form a
Two-Sample Tests Population confidence interval for the
proportions difference between two
population proportions,
∆π = π1 – π2
Population Means Population Population
Proportions Variances Assumptions:
Independent Related The point estimate for
Samples Samples n1 π1 ≥ 5, n1(1- π1) ≥ 5 the difference is
n2 π2 ≥ 5, n2(1- π2) ≥ 5 !p = p1 " p2

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Hypothesis Tests for

Two Population Proportions Two Population Proportions
(continued)
Population proportions We assume the null hypothesis is true, so…
Lower-tail test: Upper-tail test: Two-tail test: 1.  we can assume π1 = π2 and then…
H0: π1 – π2 ≤ 0 H0: π1 – π2 ≤ 0 H0: π1 – π2 = 0 2.  we can pool the two sample estimates
H1: π1 – π2 < 0 H1: π1 – π2 > 0 H1: π1 – π2 ≠ 0
The individual sample x1 x2
p1 = & p2 =
α
α
α/2 α/2 estimates are: n1 n2
The pooled estimate x1 + x 2
-za
za
-za/2
za/2
for the overall p=
Reject H0 if … proportion is: n1 + n2
ZSTAT < -Za
ZSTAT > Za
ZSTAT < -Za/2 or
ZSTAT > Za/2 where X1 and X2 are the number of items of interest in samples 1 and 2, respectively

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NSCC – BUS210 Two-Sample Hypothesis Tests

Chapter 10 10b2

Hypothesis Test Example:

Two Population Proportions Two Population Proportions
(continued)
The standard error is: In a random sample, 36 of 72 men and 31 of
50 women indicated they would vote “Yes” on
p (1# p) p (1# p)
! "p = ! p = + Proposition A. At α=.05, is there a significant
n1 n2 difference between the proportion of men and
the proportion of women who will vote “Yes”?

And the test statistic then becomes: Step 1. Develop the null and
!p-!" (p1 $ p 2 ) $ (" 1 $ " 2 ) alternative hypotheses.
zSTAT = = H0: π1 = π2
& H1: π1 ≠ π2
#p %1 1( or
p (1$ p) ' + *
& n1 n 2 ) H0: π1 – π2 = 0 & H1: π1 – π2 ≠ 0

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Hypothesis Test Example: Hypothesis Test Example:

Two Population Proportions(continued) Two Population Proportions(continued)

Step 2. Specify the level of significance α Step 3. Compute the test statistic.
and the sample size, n.
p (1# p) p (1# p) .549(.451) .549(.451)
α = 0.05 α/2 = 0.025 (two-tailed test) ! "p = + = + = 0.0916
n1 n2 72 50
n1 = 72 x1 = 36 p1 = 36/72 = .50
n2 = 50 x2 = 31 p2 = 31/50 = .62
zSTAT =
( p1 ! p 2 ) ! ( " 1 ! " 2 ) = ( .50 ! .62 ) ! ( 0 ) = ! 1.31
# $p 0.0916
§  The pooled estimate for the overall proportion is:
x1 + x 2 36 + 31 67 Step 4. Determine the critical value.
p= = = = .549
n1 + n 2 72 + 50 122 For α = 0.05, α/2 = 0.025 (two-tailed)
From Table: z = ± 1.96

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Hypothesis Test Example: Hypothesis Test Example:

Two Population Proportions(continued) Two Population Proportions(continued)
Step 5. Compare the test statistic (ZSTAT) to the Step 6. Decide
critical value (Z0)
Since -1.31 = ZSTAT > Z0 = -1.96, then “If stat’s not in the tail,

H0 cannot fail!”

Reject Reject
we do not reject H0
Region of
Non-Rejection Step 7. Conclude

-1.96 = Z0 There is insufficient evidence of a difference

in the proportion men and women who will
Here, Zstat = -1.31 > -1.96, so the test vote “Yes” on Proposition A.
statistic is in the non-rejection region

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Decision: Do not reject H0

NSCC – BUS210 Two-Sample Hypothesis Tests

Chapter 10 10b3

Confidence Interval
Two Population Proportions Two-Sample Tests
The confidence interval for π1 – π2 is:
CI = !p ± z" !p Two-Sample Tests

p1 (1# p1 ) p 2 (1# p 2 )
= (p1 # p 2 ) ± z$ /2 +
n1 n2 Population Means Population Population
Proportions Variances
= (.50 # .62) ± 1.96 (.0916) = # .300 to .060 Independent Related
Samples Samples
This interval does contain the hypothesized
proportion (H0: Δπ = 0 ), so we
do not reject the null hypothesis at α = 0.05
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Hypothesis Test for

Two-Sample Tests Two Population Variances
Hypotheses FSTAT
H 0: σ 12 = σ 22
Two-Sample Tests 2
H 1: σ 12 ≠ σ 22
F test statistic
s1
H 0: σ 12 ≤ σ 22 s22
Population Means H 1: σ 12 > σ 22
Population Population
Where:
Proportions Variances
Independent Related s12 = variance of sample 1 (the larger variance)

Samples Samples n1 = size of sample 1 (df1 = n1 – 1)

s22 = variance of sample 2 (the smaller variance)

n2 = size of sample 2 (df2 = n2 – 1)

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The F Distribution Finding the Rejection Region

Two-tailed test One-tailed test
n  The F critical value is found from the F table H 0: σ 12 = σ 22 H 0: σ 12 ≤ σ 22
n  It is determined from the degrees of freedom in the H 1: σ 12 ≠ σ 22 H 1: σ 12 > σ 22
two samples
n  The sample with the largest variance is Sample 1
α/2 F α
n  In the F table,
n  Column = numerator (degrees of freedom of Sample 1) 0 0
Do not Reject H0 Do not Reject H0 F
n  Row = denominator (degrees of freedom of Sample 2) reject H0 Fα/2 reject H0 Fα
where: df1 = n1 – 1 ; df2 = n2 – 1 Reject H0 if FSTAT > Fα/2 Reject H0 if FSTAT > Fα

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NSCC – BUS210 Two-Sample Hypothesis Tests

Chapter 10 10b4

Hypothesis Test Example: Hypothesis Test Example:

Two Population Variances Two Population Variances (continued)

You are a financial analyst for a brokerage firm. You Step 1. Develop the null and alternative hypotheses.
want to compare dividend yields between stocks listed on
H0: σ21 = σ22 (there is no difference between variances)
the NYSE & NASDAQ. You collect the following data:
H1: σ21 ≠ σ22 (there is a difference between variances)
NYSE NASDAQ
Number 21 25
Step 2. Specify the level of significance α
Mean 3.27 2.53
and the sample size, n.
Std dev 1.30 1.16
We have the following information:
Is there a difference in the α = 0.05 α/2 = 0.025 (two-tailed test)
variances between the NYSE n1 = 21 (df1 = 20) has the larger variance
& NASDAQ at the α = 0.05 level? n2 = 25 (df2 = 24)
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Hypothesis Test Example: Hypothesis Test Example:

Two Population Variances (continued) Two Population Variances (continued)
Step 5. Compare the test statistic (FSTAT) to the critical value (F0)
Step 3. Compute the test statistic from the sample
data ( σ is unknown so we use t )
H 0: σ 12 = σ 22
H 1: σ 12 ≠ σ 22
S 2 1.30 2 This value is always Reject
FSTAT = 12 = = 1.256 greater than 1
S 2 1.16 2 Non-rejection
Region α/2 = .025

Step 4. Convert significance level to the critical value. 0 F

FSTAT = 2.33
For α = 0.05, α/2 = 0.025 (two-tailed test), F0.025= 2.33

Step 6. Decide FSTAT is not in the rejection region, so we

Fα/2 = F.025, 20, 24 = 2.33 do not reject H0
Step 7. Conclude There is not sufficient evidence of a
difference in variances at α = .05
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Two-Sample Tests

End
Part B

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NSCC – BUS210 Two-Sample Hypothesis Tests