Chapter 5 outline

Hypothesis Testing

We cannot prove that a theory is correct, but we can reject a given hypothesis with a certain degree of
confidence.

Explicitly state the hypothesis to be tested.

Two-sided test,

One-sided test.

Types I error: we reject a true null hypothesis (false negative)

Type II error: we accept a false null hypothesis (false positive)

Decision rule: calculate a t-statistic that allows comparison with a critical value of the t.

p. 121 How to calc t-stat.

p. 122 Woody’s example.

Critical t: select level of confidence, figure out if it is one-tailed or two-tailed, calculate degrees of
freedom. Look at table in Appendix B1.

Decision rule: If tk is greater than tc AND if sign is as predicted.