9/3/2021

Lecture 1: Course
Introduction, Review and
Paired-Samples t-test

Outline

• Course introduction

• Revision of important Statistics concepts

• Paired-samples t-test

Course Introduction
Business and Economics Statistics

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Course Introduction:
Objectives
This course aims to:
• Introduce a number of statistical techniques (Inference about
variances, Chi-squared tests, ANOVA, Non-parametric techniques,
etc.)
• Discuss the applications of these techniques in practical situations.
• Enable students to work on a small-scale case study to gain
valuable experience on data analysis.
• Provide practical sessions where students can practice with the R
statistical software

Course Introduction:
Assessment
• Attendance: 10%
• Case Study Analysis and Presentation: 20% (Wk 6 – Intro -
tentative)
• Midterm Test: 20% (Wk 8 – In lecture - tentative)
• Final Exam: 50%
Read your course outline carefully. It contains important
information regarding the course schedule, assessment, etc.

Course Introduction:
Study Materials
• Study materials:
• Lecture notes
• Required readings (in textbook and reference book; note that you
should print only the chapters specified in the required readings that
will be posted on Google class)
• Tutorial/lab exercises, etc.

You are required to be in the Google class for the course.

Important materials and announcements will be posted there.

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Course Introduction:
Recommended Study Strategies
• Discuss lecture notes with your peers. Review your lecture
notes weekly
• Attempt all the tutorial/lab exercises before class
• Participate actively in class: present solutions, ask questions,
contribute ideas, take notes, etc.
• Read the assigned readings in textbook and reference book
• Work actively on your case study and the labs
• Do further reading if time permits
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Revision of Statistics Concepts

Probability and Statistics

Notation

Population Parameter Sample Statistic

Mean

Proportion ̅
Variance

Standard Deviation

Size

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Descriptive Statistics – Numerical Methods

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Measures of Central Tendency

Mean Median
1. Most common measure 1. Middle value in ordered
2. Affected by extreme values sequence
• If Odd n, middle value of sequence
(‘Outliers’)
• If Even n, average of 2 middle values
3. Formula for sample mean 2. Not affected by extreme values
∑
X= 3. Position of median (for sample)
4. Example Positioning point =
10.3 4.9 8.9 11.7 6.3 7.7 4. Example
X =? 10.3 4.9 8.9 11.7 6.3 7.7
Median = ?
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Measures of Variation:
Variance & Standard Deviation
Characteristics Formula
1. Most common measures ∑
=
2. Involve all values in sample 1
(or population) n - 1 in denominator! (Use N if Population
3. Show variation about mean ( Variance)
or µ) =
4. Affected by outliers Note the notation and formula of population
5. Advantage of the SD over the variance and standard deviation.
variance? Example 5, 7, 10, 15, 18
Mean = ? Standard deviation = ?
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Statistical Inference

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Interval Estimation
1. Provides range of values
2. Gives information about closeness to unknown population
parameter
• Stated in terms of probability
• Knowing exact closeness requires knowing unknown population parameter

3. Example: Unknown population mean lies between 50 & 70 with

95% confidence
4. Interval width is influenced by data variability, sample size and
level of confidence

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Key Elements of Interval Estimation

Sample statistic
(point estimate)
Confidence interval

Confidence limit Confidence limit

(lower) (upper)
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Interval Estimation:
Confidence Level α
1. Probability that the interval contains unknown
population parameter
2. Denoted 1 - α
• α Is probability that interval does not contain parameter

3. Typical values are 99%, 95%, 90%

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Hypothesis Testing:
Definition & Procedure
A hypothesis test allows us to draw conclusions or make decisions regarding
population data from sample data. There are 6 steps:
1. Hypotheses (Ho, Ha) -> Right-tailed, Left-tailed, Two-tailed tests
2. Test statistic
3. Level of significance α
4. Decision rule
• Reject Ho when ...
5. Value of the test statistic
6. Conclusion
• Do not reject Ho: The test is not significant.
• Reject Ho: The test is significant.
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Hypothesis Testing:
What Is a Hypothesis?
• Usually a statement about population parameters

Parameter is Population Mean, Proportion, Variance

Must be stated Before analysis

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Research Hypothesis vs. Null Hypothesis

Research Hypothesis Null Hypothesis

1. What we aim to show 1. Believed to be true or used as
statistically starting point for testing
2. Statement we hope or suspect 2. Opposite of research hypothesis
is true
3. Convention: contains equality
3. Denoted as Ha sign
4. Convention: no equality sign 4. Usually phrased as “no effect”,
5. Also called alternative “no difference”
hypothesis 5. Called Ho

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Hypothesis Testing:
Identifying Hypotheses Steps
1. Example Problem: Test that the population mean is not 3
2. Steps
• State the question statistically (µ ≠ 3)
• State the opposite statistically (µ = 3)
Must be mutually exclusive & exhaustive

• Select the alternative hypothesis (µ ≠ 3)

Has the ≠, <, or > sign
• State the null hypothesis (µ = 3)
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Hypothesis Testing:
Definition & Procedure
A hypothesis test allows us to draw conclusions or make decisions regarding
population data from sample data. There are 6 steps:
1. Hypotheses (Ho, Ha) -> Right-tailed, Left-tailed, Two-tailed tests
2. Test statistic
3. Level of significance α
4. Decision rule
• Reject Ho when ...
5. Value of the test statistic
6. Conclusion
• Do not reject Ho: The test is not significant.
• Reject Ho: The test is significant.
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Hypothesis Testing:
p-Value
1. Probability of obtaining a Test Statistic more extreme (≥ or ≤
than actual sample statistic (computed from the sample data)
given H0 is true.
2. Used to make rejection decision
• If p-Value < α, Reject H0
• If p-Value ≥ α, Do not reject H0

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Hypothesis Testing:
Possible Errors in Testing
• Probability of Type I error: alpha
• Significance level
• Probability of Type II error: beta

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Hypothesis Testing:
Common Pitfalls
Choose or change hypotheses after looking at data

Choose or change level of significance after looking at data

Do not reject Ho accept Ho without considering power (1-β)

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Paired-Samples t Test
Paired Difference Experiments

Paired-Samples t Test for Mean Differences

1. Paired Samples
• Matched pairs
• Repeated measures (Before/After)
2. Eliminates Variation Among Subjects

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Paired-Samples vs. Independent Samples

Example:
A company wants to increase productivity and currently uses 2
production methods. It seeks to identify which production method is
better.

Design 1: Two groups of workers were randomly selected. One group

use Method 1 and the other group use Method 2. Data were collected
on both groups regarding production times.

Design 2: One group of workers was randomly selected. Each worker

first use one method and then the other method. The order of
methods is randomly assigned. Data were collected on the production
times.
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Paired-Samples vs. Independent Samples

Problem:
Do older people exercise significantly less frequently
than younger people?

• Independent samples design:

• Paired samples design:

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Paired-Samples t Test:
Hypotheses

Note: Di = X1i - X2i for ith observation

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Paired-Samples t Test:
Data Collection Table
Observation Group 1 Group 2 Differences
1 = -
2 = -
⋮ ⋮ ⋮ ⋮
i = −
⋮ ⋮ ⋮ ⋮
n = −

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Paired-Samples t Test:
Assumptions
Assumptions
• The population of differences is normal.
• The differences are randomly selected from the population
of differences.

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Paired-Samples t Test:
Test Statistic
Test statistic:

!
= #$ = -1
"

Sample mean: Sample Standard deviation:

∑ ∑
= " =
1
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Paired-Samples t Test:
Example
You work in Human Resources. You want to see if a training
program is effective. You collect the following test score data:

Name Before (1) After (2)

Sam 85 94
Tamika 94 87
Brian 78 79
Mike 87 88

At the .10 level, was the

training effective?
Assume the assumptions are satisfied.

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Paired-Samples t Test:
Computation Table
Observation Before (1) After (2) Difference
Sam 85 94 -9
Tamika 94 87 7
Brian 78 79 -1
Mike 87 88 -1
Total -4

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Paired-Samples t Test:
Null Hypothesis
1. Was the training effective?
2. Effective means ‘After’ > ‘Before’.
3. Statistically, this means µ2 > µ1.
4. Rearranging terms gives 0 > µ1 - µ2.
5. Defining µD = µ1 - µ2 & substituting into (4) gives 0 > µD or µD < 0.
6. The alternative hypothesis is Ha: µD < 0.

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Paired-Samples t Test:
Solution
Test Statistic:
•Ho: µD = 0 (µD = µ1 - µ2)
•Ha: µD < 0 %& ' ( ' '!
= )& = +.-. = -.306
•α = .10 *& /
•df = 4 - 1 = 3
•Critical Value(s): Decision:
Do not reject Ho at α = .10
Reject
Conclusion:
.10
Test is not significant and there is not
enough evidence to conclude that the
-1.6377 0 t training was effective
Limitation: Sample size too small

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Conclusion

• Course Introduction

• Revision of Statistics Concepts

• Mean, Variance, Standard Deviation
• Confidence Interval
• Hypothesis Testing

• Paired-samples t-test
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