The University of Hong Kong

Department of Statistics & Actuarial Science

STAT1600A Statistics: Ideas and Concepts
2019-2020 First Semester

Core course for Risk Management Major and Statistics Major:

STAT1600A Statistics: Ideas and Concepts (2019-2020 First Semester)

Assignment 5

You don’t need to submit your work for this assignment, but you are encourged to
attempt all the questions. Suggested solution of this assignment will be released in due
course.

Assignment Questions
1. Before walking to work in the morning, I make an informal test of the null hypothesis “It will
rain today” again the alternative hypothesis “It will not rain today.” Depending on the results
of this test, I decide to carry or not to carry an umbrella.

(a) For this test, what are the consequences of making a Type I error and the Type II error?
(b) Which error do you consider as more serious?
(c) Is this setting of hypotheses proper? Explain briefly.

2. An automobile manufacturer wants to make sure the car brakes are free from defects before
installing them in new cars.

(a) What hypotheses should the quality control department test? State the appropriate null
and alternative hypotheses. (Take the perspective that the manufacturer’s main concern
is to avoid installing defective brakes.)
(b) In terms of the hypotheses you stated in part (a), describe the consequences of the Type
I and Type II errors.
(c) In an unrelated scenario, a film developer, wishing to determine whether the color settings
for his equipment are correct, adopts the following hypotheses:

Null hypothesis: The color settings are incorrect.

Alternative hypothesis: The color settings are correct.

Comparethis setting of hypotheses to those in part (a), in which of the tests would you
choose a smaller value for the significance level? Explain briefly.

STAT1600A Statistics: Ideas and Concepts ⇠ Page 1 ⇠ C.W. KWAN, Y.K. CHUNG
Assignment 5 Department of Statistics & Actuarial Science
The University of Hong Kong
 The University of Hong Kong
Department of Statistics & Actuarial Science
STAT1600A Statistics: Ideas and Concepts
2019-2020 First Semester

3. Suppose that a study is designed to choose between the hypotheses:

Null hypothesis: Population proportion is 0.25.

Alternative hypothesis: Population proportion is higher than 0.25.

On the basis of a sample of size 500, the sample proportion is 0.29. The standard deviation for
the potential sample proportions in this case is about 0.02.

(a) Compute the standardized score corresponding to the sample proportion of 0.29, assuming
the null hypothesis is true.
(b) What is the percentile for the standardized score computed in part (a)?
(c) What is the p-value for the test?
(d) Based on the results of parts (a) to (c), make a conclusion. Be explicit about the wording
of your conclusion and justify your answer.
(e) To compute the standardized score in part (a), you assumed the null hypothesis was true.
Explain why you could not compute a standardized score under the assumption that the
alternative hypothesis was true.

4. Participants were given psychological tests measuring positive and negative a↵ect (mood) as
well as anxiety at three time periods. Time 1 was before the meditation training. Time 2
was at the end of the 8 weeks of training, and Time 3 was 4 months later. One of the results
reported in the paper is

There was a significant decrease in trait negative a↵ect with the meditators showing
less negative a↵ect at Times 2 and 3 compared with their negative a↵ect at Time 1
[t(20) = 2.27 and t(21) = 2.45, respectively, p < .05 for both]. Subjects in the control
group showed no change over time in negative a↵ect (t<1). (Davidson et al. p.565)

(a) The first sentence of the quote reports the results of two hypothesis tests for the meditators.
Specify in words the null hypothesis for each of the two tests. They are the same except
that one is for Time 2 and one is for Time 3. State each one separately, referring to what
the time periods were. Make sure you don’t confuse the population with the sample and
that you state the hypotheses using the correct one.
(b) Refer to part (a). State the alternative hypothesis for each test. Explain whether you
decided to use a one-sided or a two-sided test and why.
(c) Write the conclusion for the Time 2 test in statistical language and in plain English.

STAT1600A Statistics: Ideas and Concepts ⇠ Page 2 ⇠ C.W. KWAN, Y.K. CHUNG
Assignment 5 Department of Statistics & Actuarial Science
The University of Hong Kong
 The University of Hong Kong
Department of Statistics & Actuarial Science
STAT1600A Statistics: Ideas and Concepts
2019-2020 First Semester

5. In a study on the prevalence of “burnout” doctors in Hong Kong public hospitals due to their
stressful life, Siu et. al. (2012) provided the following information:

“A total of 226 questionnaires were analyzed, of which 31.4% of the respondents

satisfied the criteria for high burnout. They were younger and needed to work shifts,
for their median year of practice was 8.5. High-burnout doctors worked similar hours
per week to non-high-burnout doctors (mean ± standard deviation, 56.2 ± 12.7 vs
54.7 ± 10.9; P=0.413) and reported suicidal thoughts more often (9.9% vs 2.6%;
P=0.033).”
(Hong Kong Med J 2012; 18:186-92)

(a) Give a 95% confidence interval for the proportion of the public doctors in Hong Kong who
satisfy the criteria for high burnout.
(b) It was stated that high-burnout doctors worked similar hours per week to non-high-
burnout doctors. Explain briefly how such conclusion can be made based on the in-
formation provided.
(c) The last sentence of the quote reports the results of a hypothesis test. Specify in words
the null hypothesis and the alternative hypothesis for this test.
(d) Compare the prevalence of suicidal thoughts in the high-burnout doctors to the non-high-
burnout doctors using a 95% confidence interval. What can be concluded?

6. Given the following time series dataset for X over a 48-month period. The dataset consists of
monthly observations. We are interested in deasonalising the data using 12 monthly seasonal
indexes and obtain a forecast value for Dec, 2019.
Month Data X Month Data X Month Data X Month Data X
Jan, 2016 81 Jan, 2017 103 Jan, 2018 122 Jan, 2019 170
Feb, 2016 102 Feb, 2017 120 Feb, 2018 115 Feb, 2019 196
Mar, 2016 42 Mar, 2017 53 Mar, 2018 88 Mar, 2019 125
Apr, 2016 40 Apr, 2017 46 Apr, 2018 63 Apr, 2019 111
May, 2016 53 May, 2017 104 May, 2018 154 May, 2019 110
Jun, 2016 61 Jun, 2017 96 Jun, 2018 141 Jun, 2019 131
Jul, 2016 78 Jul, 2017 81 Jul, 2018 107 Jul, 2019 150
Aug, 2016 58 Aug, 2017 70 Aug, 2018 100 Aug, 2019 124
Sep, 2016 41 Sep, 2017 50 Sep, 2018 78 Sep, 2019 103
Oct, 2016 19 Oct, 2017 35 Oct, 2018 61 Oct, 2019 102
Nov, 2016 18 Nov, 2017 54 Nov, 2018 92 Nov, 2019 102
Dec, 2016 38 Dec, 2017 57 Dec, 2018 70 Dec, 2019 ?

(a) Calculate the 12 un-normalised monthly seasonal indexes for this dataset.
(b) Calculate the 12 normalised monthly seasonal indexes for this dataset.
(c) Fit a linear trend line to the deseasonalised data using the least squares method. Assuming
t = 1 for Jan, 2016, t = 2 for Feb, 2016, etc.
(d) Provide the unadjusted forecast for Dec, 2019.
(e) Provide the seasonally adjusted forecast for Dec, 2019.

STAT1600A Statistics: Ideas and Concepts ⇠ Page 3 ⇠ C.W. KWAN, Y.K. CHUNG
Assignment 5 Department of Statistics & Actuarial Science
The University of Hong Kong
 The University of Hong Kong
Department of Statistics & Actuarial Science
STAT1600A Statistics: Ideas and Concepts
2019-2020 First Semester

7. The following table shows the unemployment rates (in %) in a city over the 10 years from 2009
to 2018.

Year Rate
2009 6.5
2010 8.5
2011 5.5
2012 4.95
2013 5.12
2014 4.25
2015 3.56
2016 3.11
2017 2.95
2018 2.55

(a) Using a smoothing coefficient of ↵ = 0.80, exponentially smooth the series and forecast
for 2019.
(b) Redo part (a) using a smoothing coefficient of ↵ = 0.20.
(c) Comment on the di↵erence in your answers for parts (a) and (b).
(d) Fit a linear trend line to the data and forecast for 2019. Compare the result with those
obtained from exponential smoothing.

⇠ End of Assignment 5 ⇠

STAT1600A Statistics: Ideas and Concepts ⇠ Page 4 ⇠ C.W. KWAN, Y.K. CHUNG
Assignment 5 Department of Statistics & Actuarial Science
The University of Hong Kong