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Lean Six Sigma Green Belt

Lesson 4—Analyze

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Objectives

After completing ● Explain the patterns of variation


this lesson, you will
● Describe the classes of distributions
be able to:
● Discuss Multi-Vari studies and the causes
● Explain correlation and its types
● Discuss the various hypothesis tests
● Discuss the application of F-test, t-test, ANOVA, and Chi-squared

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Analyze
Topic 1—Patterns of Variation

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Classes of Distributions

The data obtained from measurement phase exhibits variety of distribution, depending on the data
type and its source.

The methods used to describe the parameters for classes of distribution are:

Probability Statistics Inferential Statistics

● It is based on assumed ● Uses the measured data ● Describe the population


model of distribution. to determine a model to parameters based on the
● Used to find the chances describe the data used. sample data using a
of certain outcome/event particular model.
to occur.

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Types of Distributions

The two types of distribution are as follows:

Discrete Distribution Continuous Distribution


● Binomial distribution ● Normal distribution
● Poisson distribution ● Chi-square distribution
● t-distribution
● F-distribution

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Discrete Probability Distribution

Discrete probability distribution is characterized by the probability mass function.


● It is important to be familiar with discrete distributions while dealing with discrete data.
● The two most useful discrete probability distributions are:
o Binomial distribution; and
o Poisson distribution.
● These distributions help in predicting the sample behavior that has been observed in a population.

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Binomial Distribution

Binomial distribution is a probability distribution for the discrete data.

Characteristics
of Binomial
Distribution Describes the discrete data as a
Predicts sample behavior
result of a particular process

Best suitable when the sample size is


Used to deal with defective items less than thirty and less than ten
percent of the population

_
P R = n C r ∗ pr ∗ 1 − p n r
where, P(R) = probability of exactly (r) successes out of a sample size of (n)
p = probability of success; r = number of successes desired; n = sample size

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Binomial Distribution (contd.)

Some of the key calculations of binomial distribution are shown.

Term Formula

𝜇 = 𝑛𝑝
Mean where, n = sample size
p = probability of success

𝜎 = 𝑛𝑝(1 − 𝑝)
Standard Deviation where, n = sample size
p = probability of success

5! = 5 ∗ 4 ∗ 3 ∗ 2 ∗ 1 = 120
Sample factorial calculation
4! = 4 ∗ 3 ∗ 2 ∗ 1 = 24

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Calculating Binomial Distribution—Example

Q Using binomial distribution formula, find the probability of getting 5 heads in 8 coin tosses.

A ● Tossing a coin has only two outcomes, Head or Tail.


● Outcomes are statistically independent.
Therefore,

p = probability of success = 0.5 (this remains fixed over time)


n = sample size = 8
r = number of successes desired = 5

P R = 8 C 5 ∗ 0.55 ∗ 1 − 0.5 8_5= 0.2187 = 21.87%

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Poisson Distribution

Poisson distribution is an application of the population knowledge to predict the sample behavior.

Characteristics
of Poisson
Distribution
Describes the discrete Deals with integers which
data can take any value

Used to analyze Used where the


situations wherein the probability of success in
number of trials is large each trial is very small

Used for predicting the


number of defects

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Poisson Distribution—Formula

The formula for the Poisson distribution is as follows:

λx ∗ e−λ
P ∗ =
∗!
where, P(x) = probability of exactly (∗) occurrences in a Poisson distribution (n)
λ = mean number of occurrences during interval
∗ = number of occurrences desired
e = base of the natural logarithm (equals 2.71828)

Mean of a Poisson Distribution (µ) = λ


! Standard Deviation of a Poisson Distribution (σ) = λ
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Calculating Poisson Distribution—Example

Q The past records of a road junction which is accident-prone show that the mean number of accidents every
week is 5 at this junction. Assume that the number of accidents follows a Poisson distribution and calculate
the probability of any number of accidents happening in a week.

A Assumption is the number of accidents follows a Poisson distribution


Given: =5 per week
5x ∗ e−5
Now, probability of zero accidents per week P 0 = = 0.006
0!

51 ∗ e−5
Probability of exactly one accident per week P 1 = = 0.03
1!

Probability of more than two accidents per week = 1 – [P(0)+P(1)+P(2)] = 1 – [0.006+0.03+0.08]


= 0.884 = 88.4%

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Continuous Probability Distribution

Continuous probability distribution is characterized by the probability density function.

● A variable is said to be continuous if the range of possible values falls along a continuum.

Example: Loudness of cheering at a ball game, weight of cookies in a package, length of a pen,
or the time required to assemble a car.

● These distributions help in predicting the sample behaviour observed in a population.

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Normal Distribution

The Normal or Gaussian distribution is a continuous


probability distribution, illustrated as N (µ, σ).
● It has a higher frequency of values around the
mean and fewer occurrences away from it.
● It is used as a first approximation to describe
real-valued random variables that tend to
cluster around a single mean value.
● It is a bell-shaped curve and is symmetrical.
● The total area under the normal curve p(x which Normal Distribution with Mean = 100 and Standard Deviation = 10
is found in the distribution) = 1.

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Normal Distribution (contd.)

In a normal distribution, to standardize comparisons of dispersion, a standard Z variable is utilized.


The uses of Z value are as follows:
● It is unique for each probability within the normal distribution.
● It helps in finding probabilities of data points anywhere within the distribution.
● It is dimensionless with no units like mm, liters, coulombs, etc.

(Y − µ)
Z=
σ
where, Z = number of standard deviations between Y and the µ
Y = value of the data point in concern
µ = mean of the population
σ = standard deviation of the population

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Calculating Normal Distribution—Example

Q Suppose the time taken to resolve customer problems follows a normal distribution with the mean value of
250 hours and standard deviation value of 23 hrs. What is the probability that a problem resolution will take
more than 300 hrs?

A Given:
● Y = 300
● µ = 250
● σ = 23
(300−250)
Using the formula: Z = = 2.17
23

● From a Normal Distribution Table, the Z value of 2.17 covers an area of 0.98499 under itself
● Thus, the probability that a problem can be resolved in less than 300 hrs is 98.5%
● The chances of a problem resolution taking more than 300 hours is 1.5%

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Z-Table Usage

The probability of areas under the curve is 1. For the actual value, one can identify the Z score by
using the Z-table.

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Z-Table

This Z-table gives the


Z 0.0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09
probability that Z is between
0.0 0.5000 0.5040 0.5080 0.5120 0.5160 0.5199 0.5239 0.5279 0.5319 0.5359
zero and a positive number.
0.1 0.5398 0.5348 0.5478 0.5517 0.5557 0.5596 0.5636 0.5675 0.5714 0.5753

0.2 0.5793 0.5832 0.5871 0.5910 0.5948 0.5987 0.6026 0.6064 0.6103 0.6141

This is the most commonly 0.3 0.6179 0.6217 0.6255 0.6293 0.6331 0.6368 0.6406 0.6443 0.6480 0.6517

used normal distribution Z- 0.4 0.6554 0.6591 0.6628 0.6664 0.6700 0.6736 0.6772 0.6808 0.6844 0.6879

table with the positive Z- 0.5 0.6915 0.6950 0.6985 0.7019 0.7054 0.7088 0.7123 0.7157 0.7190 0.7224

scores. 0.6 0.7257 0.7291 0.7324 0.7357 0.7389 0.7422 0.7454 0.7486 0.7517 0.7549

0.7 0.7580 0.7611 0.7642 0.7673 0.7704 0.7734 0.7764 0.7794 0.7823 0.7852

0.8 0.7881 0.7910 0.7939 0.7967 0.7995 0.8023 0.8051 0.8078 0.8106 0.8133

0.9 0.8159 0.8186 0.8212 0.8238 0.8264 0.8289 0.8315 0.8340 0.8365 0.8389

1.0 0.8413 0.8438 0.8461 0.8485 0.8508 0.8531 0.8554 0.8577 0.8599 0.8621

1.1 0.8643 0.8665 0.8686 0.8708 0.8729 0.8749 0.8770 0.8790 0.8810 0.8830

1.2 0.8849 08869 0.8888 0.8907 0.8925 0.8944 0.8962 0.8980 0.8997 0.9015

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Using Z-Table—Example

Q Find the value of p of (Z less than 0).

A There is no need of the table to find the answer once you know that the variable Z takes a value of
less than (or equal to) zero.
● First, the area under the curve is 1, and second, the curve is symmetrical about Z = 0.
● Hence, there is 0.5 (or 50%) above chance of Z = 0 and 0.5 (or 50%) below chance of Z = 0.

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Using Z-Table—Example (contd.)

Q Find the value of p of (Z greater than 1.12).

A The opposite or complement of an event A occurring is the event A not occurring.


P(not A) = 1 – P(A)
P(Z greater than 1.12) = 1 – P(Z less than 1.12)
Using the table:
P(Z < 1.12) = 0.5 + P(0 < Z < 1.12) = 0.5 + 0.3686 = 0.8686
Hence P(Z > 1.12) = 1 – 0.8686 = 0.1314

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Using Z-Table—Example (contd.)

Q Find the value of p of (Z lies between 0 and 1.12).

A ● Z falls within an INTERVAL


Using the table:
P(Z lies between 0 and 1.12) = 0.3686

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Chi-Square Distribution

Chi-square distribution (chi-squared or χ² distribution) with k-1 degrees of freedom is the distribution
of the sum of the squares of k independent standard normal random variables.

Characteristics
of χ²
Distribution

Most widely used probability The distribution is used in a


distribution in inferential statistics hypothesis test

! Degree of freedom (df) = k – 1, where k is the sample size.

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Chi-Square Distribution—Formula

The formula for the Chi-square distribution is as follows:

fO − fe 2
χ2calculated =  =
fe
where, χ2calculated () = chi-square index
fO = observed frequency
fe = expected frequency

! Chi-square distribution will be covered in detail in the later part of this lesson.

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t-Distribution

A t-distribution is most
appropriate to be used when:
● the sample size <30;
● population standard
deviation is not known; and
● population is approximately
normal.

! The t-distribution approaches normality as the sample size increases.

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F-Distribution

The F-distribution is a ratio of two Chi-square distributions, and a specific F-distribution is denoted by
the degrees of freedom for the numerator Chi-square and the degrees of freedom for the
denominator Chi-square.

S12
Fcalculated = 2
S2
where, S1 and S2 = standard deviations of the two samples
● If Fcalculated is 1, there is no difference in the variance
● If S1 > S2 , then the numerator should be greater than denominator (df1 = n1 – 1 and df2 = n2 – 1)

Refer F-table to find out critical F-distribution at α and degrees of freedom of samples of two
! different processes (df1 and df2)
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Analyze
Topic 2—Exploratory Data Analysis

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Multi-Vari Studies

Multi-Vari studies analyze variation, investigate process stability, identify investigation areas, and
break down the variation.
They classify variation sources into three major types:

Positional Cyclical Temporal

Variations within a single unit Variations among sequential Variations which occur over
where variation is due to location. repetitions over a short time. longer periods of time.

Examples: Pallet stacking in a Examples: Every n’th pallet Examples: Process drift,
truck, temperature gradient in an broken, batch-to-batch variation, performance before and after
oven, variation observed from lot-to-lot variation, invoices breaks, seasonal and shift based
cavity-to-cavity within a mold, received day-to-day, and account differences, month-to-month
region of a country, line on invoice activity week-to-week closings, and quarterly returns

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Create Multi-Vari Chart

The five steps to create a Multi-Vari chart are:

Create a Link the


Select Process and Decide
Tabulation Plot the Chart Observed
Characteristics Sample Size
Sheet Values

Example: Select Example: Sample Example: The Example: Chart is Example: The
the process size is five pieces tabulation sheet plotted with time observed values
where the plate from each with data records on X axis and the are linked by
is being equipment and contains the plate thickness appropriate lines.
manufactured the frequency of columns with on Y axis.
and measure its data collection is time, equipment
thickness within every two hours. number, and
a specified range. thickness as
headers.

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Create Multi-Vari Chart (contd.)

The path to create a


Multi-Vari chart in
Minitab is:

Minitab > Stat > Quality


Tools > Multi-Vari Chart

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Simple Linear Correlation

Correlation is the association between variables. The Coefficient Correlation shows the strength of
the relationship between Y and X.
The statistical significance is denoted by correlation coefficient ‘r’.

‘r’ or Pearson’s Coefficient of Correlation

-1 0 +1
Movement in both No correlation between Movement in both
variables is inverse the two variables variables is same

Higher the absolute value of ‘r’, stronger the correlation between Y and X.
! An ‘r’ value of > + 0.85 or < - 0.85 indicates a strong correlation.

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Correlation Levels

Correlation measures the linear


association between the output
(Y) and the input variable (X).
The patterns of correlation
displayed in scatter plots are:
● easy to see when the ‘r’
value is 0.9 and above; and
● difficult to see when the ‘r’
value is 0.5 or below.

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Regression

The degree of movement of variable changes is calculated using regression.


If a high percentage of variability in Y (r2> 70%) is explained by changes in X, the model to write a
transfer equation is as follows:
Y = f(X)

This equation is used to:


● predict future values of Y given X, and X given Y; and
● regress Y on one or more X’s simultaneously.

! Simple Linear Regression is for one X and Multiple Linear Regression is for more than one X.

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Key Concepts of Regression

There are two key concepts of regression:

Transfer function to control Y Vital X

Y = f(X) may not be the correct transfer function to It is important to discover whether a statistical
control Y because there may be a low level of significant relationship exists between Y and a
correlation between the two variables. particular X by looking at p-values. Based on
regression, one can infer the vital X and eliminate the
rest.

It is important to understand if there is statistical relevance between Y and X using the metrics from
! Regression Analysis. The Simple Linear Regression should be used as a Statistical Validation tool.
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Simple Linear Regression (SLR)

A simple linear regression equation is a fitted linear equation between Y and X. It is represented as
follows:

Y = A + BX ± C
where,
● Y = Dependent variable / output / response
● X = Independent variable / input / predictor
● A = Intercept of fitted line on Y axis
● B = Regression coefficient / Slope of the fitted line
● C = Error in the model

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Least Squares Method in SLR

If Y and X are not perfectly linear (r = ± 1), several lines could fit in the scatter plot. It can be inferred
from the graphs below:
● Minitab fits the line which has the least Sum of Squares of Error.
● In a linear relationship, the points would lie on the line. Typically, the data lies off the line.
● The distance from the point to line is the error distance used in the SSE calculations.

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SLR—Example

A farmer wishes to predict the relationship between the amount spent on fertilizers and the annual
sales of his crops. He collects the following data of last few years and determines his expected
revenue if he spends $8 annually on fertilizer.

Years Fertilizer Expenses in $ (Y) Annual Selling in $ (X)


2009 2 20
2010 3 25
2011 5 34
2012 4 3
2013 11 40
2014 5 31

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SLR using Microsoft Excel

The steps to perform Simple Linear Regression in Microsoft


Excel are as follows:

1. Copy the data from the cells B1 to C6 on an Excel


Worksheet.

2. Click Insert, and choose the Plain Scatter Chart (Scatter


with only Markers).

3. Right-click on the data points and choose “Add Trendline.”

4. Choose “Linear” and select the boxes titled, “Display R-


Squared value” and “Display equation.”

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Regression Analysis Using Microsoft Excel

To use the data for Regression analysis, the interpretation of the scatter chart is as follows:
● The r2 value (Coefficient of Determination) conveys if the model is good and can be used. The r2
value is 0.3797.
● 38% of variability in Y is explained by X.
● The remaining 62% variation is due to residual factors.
● The low value of r2 validates a poor relationship between Y and X.

! Refer to the Cause and Effect Matrix and study the relationship between Y and a different X variable.

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Multiple Linear Regression

If a new variable X2 is added to the r2 model, the impact of X1 and X2 on Y gets tested. This is known as
Multiple Linear Regression. In Multiple Linear Regression:
● the value of r2 changes due to the introduction of the new variable.
● the resulting value of r2 is known as ‘r2 Adjusted.’
● the model can be used if ‘r2 Adjusted’ value is greater than 70%.

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Key Concepts of Multiple Linear Regression

Multiple Linear Regression covers the following concepts:


● The residuals between the actual value and the predicted value give an indication of how good the
model is.
● If the errors are small and predictions use X’s that are within the range of the collected data, the
predictions should be fine.

SST = SSR + SSE SSR = SST - SSE r2 = SSR ÷ SST

● To check for error, take two observations of Y at the same X.


● Prioritization of X’s can be done through the SLR equation; run separate regressions on Y with each X.
● If an X does not explain variation in Y, it should not be explored further.

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Difference between Correlation and Causation

A regression equation may denote a relationship between variables. It does not indicate:
● if change in one variable causes change in the other; and
● both the variables may be dependent on another independent variable.

There is a positive
correlation between the
number of sneezes and the
deaths in the city. It cannot
be assumed that sneezing is
the cause of death though
the correlation is very strong.

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Analyze
Topic 3—Hypothesis Testing

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Statistical and Practical Significance of Hypothesis Test

The differences between a variable and its hypothesized value may be statistically significant but may
not be practical or economically meaningful.

For example: Based on the hypothesis test, Nutri Worldwide Inc. implemented a trading strategy. The
returns:
● are economically significant when logical reasons are examined before implementation.
● may not be significant when statistically proven strategy is implemented directly.
● may be economically insignificant due to taxes, transaction costs, and risks.

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Null Hypothesis vs. Alternate Hypothesis

The conceptual differences between a null and an alternate hypothesis are as follows:

Null Hypothesis Alternate Hypothesis

● Represented as H0 ● Represented as Ha
● Cannot be proved, only rejected ● Challenges the null hypothesis
● Example: Movie is good ● Example: Movie is not good

! If null hypothesis is rejected, alternative hypothesis must be right.

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Type I and Type II Error

The conceptual differences between type I and type II error are as follows:

Type I Error Type II Error

● Rejecting a null hypothesis when it is true ● Accepting a null hypothesis when it is false
● Also known as Producer’s Risk ● Also known as Consumer’s Risk
● ‘α’ is the chance of committing a Type 1 error ● ‘β’ is the chance of committing a Type II Error
● The value of ‘α’ is 0.05 or 5% ● The value of ‘β’ is 0.2 or 20%
● Example: When a movie is good, it is reviewed as ● Any experiment should have as less β value as
‘not good.’ possible
● Example: When a movie is not good, it is
reviewed as ‘good.’

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Important Points to remember about Type I and Type II Errors

While dealing with type I or type II errors, following are the points to remember:
● Probability of making one type of error can be reduced, leading to increasing the probability of
making the other type of error.
● If a true null hypothesis is erroneously rejected (Type I error), a false null hypothesis may be
accepted (Type II error).
● ‘α’ is set at 0.05, which means the risk of committing a type I error will be 1 out of 20 experiments.
● It is important to decide what type of error should be less and set ‘α’ and ‘β’ accordingly.

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Power of Test

The power of a test:


● helps in the probability of correctly rejecting the null hypothesis when it is false.
● is represented as 1-β. This is type II error.
● is the probability of not committing a type II error.
● helps in improving the advantage of hypothesis testing.
● with highest value should be preferred when given a choice of tests.

! In hypothesis testing, ‘α’ is the significance level and ‘1-α’ is the confidence level.

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Determinants of Sample Size—Continuous Data

The sample size is determined by the responses to the following questions:


● How much variation is present in the population? ( σ)
● At what interval does the true population mean need to be estimated? ( ±Δ)
● How much representation error is allowed in the sample? ( α)

The sample size for continuous data can be determined by the formula:

𝛼 2
Z1−( )∗ σ 𝛼 ∗
n= 2
1- ( 2 ) = 0.975

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Standard Sample Size Formula—Continuous Data

To calculate the standard sample size for continuous data, the value of α is taken as 5%. According to Z
table, the Z97.5 = 1.96. The standardized sample size formula is:

1.96 ∗ σ 2
n= for Continuous Data

Q The population standard deviation for the time, to resolve customer problems, is 30 hours. What should
be the size of a sample that can estimate the average problem resolution time within ± 5 hours tolerance
with 99% confidence?

Δ = 5, σ = 30, α =0.01, and Z99.5 = 2.575.


A Sample size = [(2.575*30)/5]2 = 238.70 = 239

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Standard Sample Size Formula—Discrete Data

To calculate the standard sample size for discrete data, if the average population proportion non-
defective is ‘p’, then population standard deviation can be calculated as:

1.96 2
σ= p(1 − p) n= p(1 − p) for Discrete Data

Where ∆ = Tolerance allowed on either side of the population proportion average in %

Q The non-defective population proportion for pen manufacturing is 80%. What should be the sample size to
draw a sample that can estimate the proportion of compliant pens within ± 5% with an alpha of 5%?

A Δ = 0.05, σ 2= 0.8 (1-0.8), α = 0.05, and Z97.5 = 1.96


Sample size = (1.96/0.05)2 *0.8*0.2 = 245.86 = 246

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Hypothesis Testing Roadmap

The figure below helps in concluding the type of test one should perform based on the kind of data
and values available:

Hypothesis testing

Discrete data Continuous data

Mean Variance Variance Mean


X2-test
Comparison Comparison
F-test of two of many

σ unknown t-test F-test

σ known Z-test

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Hypothesis Test for Means (Theoretical)—Example

H0: Average height of North American males is 165 cm (μ0)


Ha: Average height of Indian males < > 165 cm
H0: μ = μ0 against Ha: μ < > μ0
Sample size (n) = 117 (Z-test) and Sample size (n) = 25 (t-test); Sample average (X) = 164.5 cm

Z-test (σ known) t-test (σ unknown)

The population SD is known; σ = 5.2 The population SD is unknown; however, it is estimated


Compute z = (X – μ0) / √(σ2/n) = (165 – 164.5) / √ from the sample SD; s = 5.0
(5.22/117) = 1.04 Compute t = (X- μ0) / √(s2/ n) = (165 – 164.5) / √(52 /25)=
Reject H0 at level of significance α if z > zα 0.5
Since z0.05 = 1.96, the null hypothesis is not rejected at 5% Reject H0 at level of significance α if t > tn-1, α
level of significance. Thus a conclusion based on the Since t24, 0.05 = 2.064, the null hypothesis is not rejected at
sample collected is that the average height of North 5% level of significance. Thus a conclusion based on the
American males is 165 cm. sample collected is that the average height of North
American males is 165 cm.
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Hypothesis Test for Variance—Example

In hypothesis test for variance Chi square test is used. This is explained in the example below:

H0: Proportion of wins in Australia or abroad is independent of the country played against
Ha: Proportion of wins in Australia or abroad is dependent on the country played against
χ2 Critical = 6.251 and
χ2 Calculated = 1.36

Result: Since calculated value is less than the critical value, the proportion of wins of Australia hockey
team is independent of the country played or place.

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Hypothesis Test for Proportions—Example

The hypothesis test on population proportion can be performed as follows:

H0: Proportion of smokers among males in a place named R is 0.10 (p0)


Ha: Proportion of smokers among males in R is different than 0.10
H0: p = p0 against Ha: p < > p0
Among n = 150 adult males interviewed, 23 were found smokers.
Sample proportion p = 23/150 = 0.153

Compute test statistic:

Reject H0 at level of significance α if z > zα


Since z0.05 = 1.96, the null hypothesis is rejected at 5% level of significance in favor of the alternative

Result: It can be concluded that the proportion of smokers in R is greater than 0.10.

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Comparison of Means of Two Processes

Means of two processes are compared to:


● understand the significant difference in the outcome of the two processes;
● understand whether a new process is better than an old process;
● understand whether the two samples belong to the same population or a different population;
and
● benchmark the existing process with another process.

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Paired Comparison Hypothesis Test for Means (Theoretical)

The two-mean t-test with unequal variances is:


● H0: μ1 = μ2 against Ha: μ1≠μ2
● Two samples of sizes n1 = 125 and n2 = 110 are taken from the two populations
● X1 = 167.3, X2 = 165.8, s1 = 4.2, s2 = 5.0 are the sample means and SDs respectively
● Compute test statistic

● Reject H0 at level of significance α if |Computed t|> tDF,α/2


● Since t223, 0.025 = 1.96, the null hypothesis is rejected at 5% level of significance

Copyright 2014, Simplilearn, All rights reserved. 56


Paired Comparison Hypothesis Test for Variance—F-Test Example

Q Susan is examining the earnings of two companies. According to her, the earnings of Company A are more
volatile than those of Company B. She has been obtaining earnings data for the past 31 years for Company
A, and for the past 41 years for Company B. She finds that the sample standard deviation of Company A’s
earnings is $4.40 and of Company B’s earnings is $3.90. Determine whether the earnings of Company A
have a greater standard deviation than those of Company B at 5% level of significance.

A H0 : σA2= σB2 = the variance of Company A’s earnings is equal to the variance of Company B’s earnings.
Ha : σA2 < > σB2 = the variance of Company A’s earnings is different.
σA2= variance of Company A’s earnings.
σB2= variance of Company B’s earnings.

Note: σA > σB. In calculating the F-test statistic, always put the greater variance in the numerator.

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Hypothesis Test for Equality of Variance—F-Test Example

The degrees of freedom for company A and company B are:


● dfA (degrees of freedom of A) = 31 – 1 = 30
● dfB (degrees of freedom of B) = 41 – 1 = 40

The critical value from F-table equals 1.74. The null hypothesis is rejected if the F-test statistic is
greater than 1.74.

Calculation of F-test statistic: F= (SA2/SB2) = 4.402/3.902 = 1.273

Results: The F-test statistic (1.273) is not greater than the critical value (1.74). Therefore, at 5%
significance level, the null hypothesis cannot be rejected.

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Hypothesis Tests—F-Test for Independent Groups

A restaurant wanting to explore the recent overuse of avocados suspects there is a difference
between two chefs and number of avocados used to prepare the salads. The table shows the measure
of avocados in ounces.

Group A (Chef 1) Group B (Chef 2)


4.2 4
4.5 4.5
7.2 5
6.1 5.2
8.9 5.3
5.2 6.1

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F-Test

The steps for conducting F-


Test in MS-Excel are:
1. Click Data Analysis
under Data tab.
2. Select F-Test Two-
Sample for Variances.
3. In Variable 1 and 2
range, select the right
data set.
4. Click Ok.

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F-Test Assumptions

Before interpreting the F-test, the assumptions to be considered are as follows:


● Null Hypothesis: There is no significant statistical difference between the variances of the two
groups, thus concluding any variation could be because of chance. This is Common Cause of
Variation.
● Alternate Hypothesis: There is a significant statistical difference between the variances of the two
groups, thus concluding variations could be because of assignable causes also. This is Special Cause
of Variation.

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F-Test Interpretations

The interpretations for the conducted F-test are as F-Test Two-Sample for Variances

follows: Variable 1 Variable 2


● From the Excel result sheet, the p-value is 0.03.
Mean 6.016666667 5.016666667
● If p-value is < 0.05, null must be rejected.
Variance 3.197666667 0.517666667
● Null hypothesis with 97% confidence is rejected.
Observations 6
● The fact that variation could only be due to Common 6

Cause of Variation is rejected. df 5 5

● There could be Assignable Causes of Variation or F 6.177076626

Special Causes of Variation. P(F<=f) one-tail 0.033652302

F Critical one-tail 5.050329058

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Hypothesis Tests—t-Test for Independent Groups

The table shows the measure of avocados in ounces. If a significant difference in their means is found,
it can be concluded that there is a possibility of Special Cause of Variation.

Group A (Chef 1) Group B (Chef 2)


4.2 4
4.5 4.5
7.2 5
6.1 5.2
8.9 5.3
5.2 6.1

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2-Sample t-Test

The steps for conducting 2-sample t-test in MS-Excel are given below:

1 2 3
Select 2-Sample
Open MS Excel, In Variable 1 range,
Independent t-test
click Data and click select the data set
assuming unequal
Data Analysis. for Group A.
variances.

4 5 6
Keep the
In Variable 2 range,
“Hypothesized
select the data set Click Ok.
Mean Difference”
for Group B.
as 0.

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Assumptions of 2-Sample Independent t-Test

The assumptions for a 2-Sample Independent t-test are as follows:


● Null Hypothesis: There is no significant statistical difference between the means of the two groups,
thus concluding any variation could be because of chance. This is Common Cause of Variation.
● Alternate Hypothesis: There is a significant statistical difference between the means of the two
groups, thus concluding variations could be because of assignable causes also. This is Special Cause
of Variation.

H0 : Mean of Group A = Mean of Group B


Ha : Mean of Group A ≠ Mean of Group B

The alternate hypothesis tests two conditions, Mean of A < Mean of B and Mean of A > Mean of B. Thus a
! two-tailed probability needs to be used.

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2-Tailed vs. 1-Tailed Probability

The difference between the usage of the 2-tailed probability and one-tailed probability are as follows:

2-Tailed Probability 1-Tailed Probability

● If the alternate hypothesis tests more than ● If the alternate hypothesis tests one
one direction, either less or more, use a 2- direction, use a 1-tailed probability value
tailed probability value from the test. from the test.

Example: If Mean of A is not equal to Mean of B, Example: If Mean of A is greater than Mean of B,
then it is 2-tailed probability. then it is 1-tailed probability.

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2-Sample Independent t-Test—Results and Interpretations

According to the table: t-Test: Two-Sample Assuming Unequal Variances


● The p-value of 2-tailed Variable 1 Variable 2

probability testing is 0.24. Mean 6.016666667 5.016666667

● This value is greater than Variance 3.197666667 0.517666667


Observations 6 6
0.05.
Hypothesized Mean 0
● The null hypothesis is not
df 7
rejected.
T Stat 1.270798616
● Both the groups are
P(T<=t) one-tail 0.122200546
statistically same.
T Critical one-tail 1.894578605

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Paired t-Test

The paired t-test is:


● one of the powerful tests from the t-test family;
● conducted before and after the process to be measured; and
● often used in the Improve stage.

For example, a group of students score X in CSSGB before taking the Training program. Post the training
program, the scores are taken again.
● One needs to find out if there is a statistical difference between the two sets of scores.
● If there is a significant difference, the inference could be that the training was effective.

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Sample Variance

Sample Variance (S2) is the average of the squared differences from the mean.
● It is used to calculate and understand the degree of variation of a sample.
● In statistics, its value is used by converting it into standard deviation and combining with the
mean.

The steps for calculating sample variance are as follows:

Subtract each of Calculate the Take average of


Calculate the mean of
the sample the value from square value of the squared
mean the result differences

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Sample Variance—Example

The example to calculate sample variance is as follows:

Consider the sample of weights. Suppose the mean value is 140 and when you subtract each value
from the mean, take the square value of the result, and then take the average of the squared
difference, the resulting sample variance value is 1936.
● In order to get the standard deviation, take the square root of the sample variance: √1936 = 44.
● The standard deviation along with the mean, will tell you how much the majority of the people
weigh.
o The mean value is 140 and variance is 44, the majority of people weigh between 96 pounds
(140 - 44) and 184 pounds (140 + 44).

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ANOVA—Comparison of More Than Two Means

ANOVA:
● is used to compare the means of more than two samples;
● stands for Analysis of Variance;
● helps in understanding that all sample means are not equal;
● based shortlisted samples can further be tested; and
● generalizes the t-test to include more than two samples.

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ANOVA Example

The table shows the takeaway food delivery time of Outlet 1 Outlet 2 Outlet 3
three different outlets. To benchmark the delivery 48 50 49
time of the outlets: 49 48 48

● the null hypothesis will assume that the three 48 36 39

means are equal; and 53 50 49


58 50 34
● rejection of the null hypothesis would mean that at
50 62 33
least two outlets are different in their average
46 45 57
delivery time.
50 47 48
49 51 47
47 44 39

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Using Minitab for ANOVA

To perform ANOVA in Minitab:


1. Stack the data into two
columns.
2. In the main menu, choose
Stat > ANOVA > One-Way.
3. Select the response, delivery
time, factor, and outlet.
4. Click OK.

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Using Minitab for ANOVA (contd.)

The following output is received when the data is fed into the Minitab:

Copyright 2014, Simplilearn, All rights reserved. 74


ANOVA using Excel

To perform ANOVA, enter the data on an Excel spreadsheet, select the ANOVA-single factor test from
the Data Analysis “Toolpak,” and select the array for analysis and an output range.

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Interpreting Minitab Results

The result of the Minitab ANOVA is interpreted as follows:


● Since p-value is more than 0.05, the null hypothesis is accepted.
● There is no significant difference between the means of delivery time for three outlets.
● Based on the confidence intervals, it is found that the intervals overlap.

! In one-way ANOVA, one factor has to be benchmarked unlike the two-way ANOVA.

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Chi-Square Distribution

The Chi-square distribution (χ²-distribution) or Chi-squared:


● is a widely used probability distribution in inferential statistics;
● needs one sample for the test to be conducted; and
● with k-1 degrees of freedom is the distribution of a sum of the squares of k independent standard
normal random variables.

2
f0 −fe
𝒳2Calculated = Σ fe
Where,
• 𝒳2Calculated = chi-square index
• Fo = An observed frequency
• Fe = An expected frequency

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Chi-Square Test—Example

To analyze the Australian hockey team’s wins,


the data has two classifications:
● The table is called a 2 X 4 contingency
table.
● Expected frequency for each of the
Estimated Population Sample Statistics
observed frequencies = (row total)(column Parameters

total)/overall total.

Example: Observed frequency of 3 wins


against South Africa in Australia would convert
to expected frequency of (21 / 31) * 5 = 3.39
Copyright 2014, Simplilearn, All rights reserved. 78
Chi-Square Test—Example (contd.)

The table is populated by:


● calculating and adding the estimated
population parameters;
● estimating the observed frequency; and
● calculating the final chi-square index.

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Chi-Square Test—Example: Interpretation of Results

There is a different chi-square distribution for each different number of degrees of freedom. For chi-
square distribution, degrees of freedom are calculated as per the number of rows and columns in the
contingency table.

Degrees of freedom = (2 - 1)*(4-1) = 3


Assuming α = 10%, 𝒳2Critical = 6.251
𝒳2Calculated = 1.36
2 2
𝒳 Critical divides region into acceptance and rejection zones while 𝒳 Calculated allows
accepting or rejecting the null hypothesis depending on which zone it falls.

The calculated value is found to be less than the critical value.


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Analyze
Topic 4—Hypothesis Testing with Non-Normal Data

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Mann-Whitney Test

Mann-Whitney or Wilcoxon Rank Sum test is a non-parametric test used to compare two unpaired
groups. In this test:

● The value of  is set as 0.05.

● The rejection and acceptance condition remains the same for different cases:

If p< Reject null hypothesis

If p> Cannot reject null hypothesis, accept null hypothesis

The aim of this test is to rank the entire data available for each condition and then compare the total
! outcome of the two ranks.

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Mann-Whitney Test

The steps to perform Mann-Whitney test are as follows:

Find the average of the


Rank all the values from low to
high ranks for all the identical Test the values
values

● The smallest number gets a ● Continue till all the whole- ● Summate the ranks for the
rank of 1. number ranks are used. observations from sample 1
● The largest number gets a and then summate the rank
rank of n, where n is the total in sample 2 (larger group).
number of values in the two
groups.

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Mann-Whitney Test—Example

An example of performing Mann-Whitney test is shown here.

Group Data Sorted Data Group Rank A Final Rank G1 Rank G2 Rank
(R1) (R2)
14 2 G1 1 1.5
Avg. = 1.5 1.5 1.5
2 2 G2 2 1.5
4 3
G1 5 4 G2 3 3
6 5
16 5 G1 4 4
7.5 7.5
9 8 G2 5 5
9 10
4 9 G1 6 6
Total = 28 Total = 27
2 14 G1 7 Avg. = 7.5 7.5
n1 = 5 n2 = 5
G2 18 14 G2 8 7.5
14 16 G1 9 9
8 18 G2 10 10

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Mann-Whitney Test—Example (contd.)

The formula for the Mann-Whitney U test for n1 and n2 values is:

[n1(n1 + 1)]
U1 = n1 × n2 +
2 −R1
[n2(n2 + 1)]
U2 = n1 × n2 +
2 −R2

In this example,
U1 = 12 and U2 = 13

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Mann-Whitney Test—Example (contd.)

To calculate the U value:

● U = Min (U1, U2) = Min (12, 13) = 12

● Lookup the Mann-Whitney U test table for n1 = 5 and n2 = 5.

● To be statistically significant, the obtained U value must be equal to or less than this critical value.
! ● Since the calculated U value is 12 (not less than 2), there is no statistical difference between the mean of
the two groups.

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Kruskal-Wallis Test

The Kruskal-Wallis test is also a non-parametric test used for testing the source of origin of the
samples.

Characteristics of Kruskal-Wallis test are as follows:

● Only way to analyze the variance by ranks.

● Medians of two or more samples are compared to find the source of origin of the sample.

● Unlike the analogous one-way analysis of variance, it does not assume the normal distribution of
the residuals.

● Null hypothesis is when medians of all the groups are equal, and
! ● Alternative hypothesis is when at least one population median of one group is different than that of at
least one other group.

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Mood’s Median Test

The Mood’s median is a non-parametric test that is used to test the equality of medians from two or
more different populations. This test works when:

● the output (Y) variable is continuous, discrete-ordinal or discrete-count, and

● the input (X) variable is discrete with two or more attributes.

The steps involved in Mood’s Median test are as follows:

Find the number Form a Find expected


Find median of the Find chi-square
of values in each contingency value for each
combined data set value
sample > median table cell

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Friedman Test

Friedman test is a form of non-parametric test that does not make any assumptions on the shape and
origin of the sample.
● It allows smaller sample data sets to be analysed, and
● Unlike ANOVA, it does not require the dataset to be randomly sampled from normally distributed
populations with equal variances.

The test uses null hypothesis where the population medians of each treatment are statistically identical to
! the rest of the group.

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1 Sample Sign Test

The 1 Sample Sign test is the simplest of all the non-parametric tests that can be used instead of a
one sample t test.
● Here, H0 is the hypothecated median or assumed median of the sample, which belongs to the
population.

Steps involved in 1 Sample Sign test are as follows:

Count the number of positive Count the number of


Test the values
values negative values

Values that are larger than Values that are smaller than Check if there are significantly
hypothesized median the hypothesized median more positives (or negatives)
than expected

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1 Sample Wilcoxon Test

The 1 Sample Wilcoxon test also known as Wilcoxon Signed Rank test is a non-parametric test.
This test is:
● equivalent to parametric One Sample t-Test, and
● powerful than non-parametric 1 Sample Sign Test.

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Characteristics of 1 Sample Wilcoxon Test

Some characteristics of this test are as follows:


● It assumes the existing sample is randomly taken from a population, with a symmetric frequency
distribution around the median, and
● The symmetry can be observed with a histogram, or by checking if the median and mean are
approximately equal.

The conclusion in this test is that if the value is on the mid-point, you can continue and accept the null
! hypothesis. If not, reject the alternate hypothesis.

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1 Sample Wilcoxon Test—Example

An example of Sample Wilcoxon test is shown.

The Median customer satisfaction score of an organization has always been 3.7 and the management
wants to see if this has changed. They conducted a survey and got the results grouped by the
customer type.
Conclusion:
● If median = 3.7 = Accept H0
● If median ≠ 3.7 = Reject Ha
● α = 0.05

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Quiz

Copyright 2014, Simplilearn, All rights reserved.


QUIZ Which of the following describes the population parameters based on the sample data
1 using a particular model?

a. Statistics

b. Inferential Statistics
c. Probability

d. Correlation

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QUIZ Which of the following describes the population parameters based on the sample data
1 using a particular model?

a. Statistics

b. Inferential Statistics
c. Probability

d. Correlation

Answer: b.
Explanation: Inferential statistics describe the population parameters based on the sample
data using a particular model.
Copyright 2012-2014,Simplilearn,All rights reserved
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QUIZ Which of the following is an application of the population knowledge to predict the
2 sample behavior?

a. Poisson distribution

b. Normal distribution
c. Chi-square distribution

d. Probability distribution

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QUIZ Which of the following is an application of the population knowledge to predict the
2 sample behavior?

a. Poisson distribution

b. Normal distribution
c. Chi-square distribution

d. Probability distribution

Answer: a.
Explanation: Poisson distribution is an application of the population knowledge to predict
the sample behavior.
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Copyright 2014, Simplilearn, All rights reserved. 98
QUIZ Which of the following is used to calculate the degree of movement of variable Y as X
3 changes?

a. Correlation

b. Probability
c. F-distribution

d. Regression

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QUIZ Which of the following is used to calculate the degree of movement of variable Y as X
3 changes?

a. Correlation

b. Probability
c. F-distribution

d. Regression

Answer: d.
Explanation: The degree of movement of variable Y as X changes is calculated using
regression.
Copyright 2012-2014,Simplilearn,All rights reserved
Copyright 2014, Simplilearn, All rights reserved. 100
QUIZ A null hypothesis states that a process has not improved as a result of some
4 modifications. The type II error is to conclude that:

a. we have failed to reject the null hypothesis (H0) when it is true.

b. we have failed to reject the null hypothesis (H0) when it is false.


c. we have rejected the null hypothesis.

d. we have made a correct decision with alpha probability.

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QUIZ A null hypothesis states that a process has not improved as a result of some
4 modifications. The type II error is to conclude that:

a. we have failed to reject the null hypothesis (H0) when it is true.

b. we have failed to reject the null hypothesis (H0) when it is false.


c. we have rejected the null hypothesis.

d. we have made a correct decision with alpha probability.

Answer: b.
Explanation: A type II error means that we have failed to reject the null hypothesis (H0)
when it is false.
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QUIZ
The test used for testing significance in an analysis of variance table is the:
5

a. Z-test.

b. t-test.
c. F-test.

d. Chi-square test.

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QUIZ
The test used for testing significance in an analysis of variance table is the:
5

a. Z-test.

b. t-test.
c. F-test.

d. Chi-square test.

Answer: c.
Explanation: The appropriate ANOVA test is the F-test. ANOVA is a test of the equality of
means.
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Copyright 2014, Simplilearn, All rights reserved. 104
QUIZ
Which of the following is the only way to analyze the variance by ranks?
6

a. 1 Sample Wilcoxon test

b. 1 Sample Size test


c. Friedman test

d. Kruskal-Wallis test

Copyright 2014, Simplilearn, All rights reserved. 105


QUIZ
Which of the following is the only way to analyze the variance by ranks?
6

a. 1 Sample Wilcoxon test

b. 1 Sample Size test


c. Friedman test

d. Kruskal-Wallis test

Answer: d.
Explanation: The Kruskal-Wallis test is the only way to analyze the variance by ranks.

Copyright 2012-2014,Simplilearn,All rights reserved


Copyright 2014, Simplilearn, All rights reserved. 106
QUIZ What distribution is used while making inferences about a population variance based
7 on a single sample from that population?

a. Chi-square distribution

b. Normal distribution
c. t-distribution

d. F-distribution

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QUIZ What distribution is used while making inferences about a population variance based
7 on a single sample from that population?

a. Chi-square distribution

b. Normal distribution
c. t-distribution

d. F-distribution

Answer: a.
Explanation: The chi-square distribution is used to compare a sample variance with a known
population variance.
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QUIZ
If p-value is less than the significant value, the null hypothesis has to be:
8

a. rejected.

b. accepted.
c. maintained as it is.

d. re-evaluated.

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QUIZ
If p-value is less than the significant value, the null hypothesis has to be:
8

a. rejected.

b. accepted.
c. maintained as it is.

d. re-evaluated.

Answer: a.
Explanation: If the p-value is less than the significant value, the null hypothesis has to be
rejected as the data is not supporting the null hypothesis and the difference will be
statistically significant.
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QUIZ Which of the following is a nonparametric test that is used to test the equality of
9 medians from two or more different populations?

a. Mood’s median test

b. Kruskal-Wallis test
c. Friedman test

d. 1 Sample Sign test

Copyright 2014, Simplilearn, All rights reserved. 111


QUIZ Which of the following is a nonparametric test that is used to test the equality of
9 medians from two or more different populations?

a. Mood’s median test

b. Kruskal-Wallis test
c. Friedman test

d. 1 Sample Sign test

Answer: a.
Explanation: The Mood’s median is a nonparametric test that is used to test the equality of
medians from two or more different populations.
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QUIZ
Which of the following is a ratio of two chi-square distributions?
10

a. F-distribution

b. t-distribution
c. Poisson distribution

d. Binomial distribution

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QUIZ
Which of the following is a ratio of two chi-square distributions?
10

a. F-distribution

b. t-distribution
c. Poisson distribution

d. Binomial distribution

Answer: a.
Explanation: The F-distribution is a ratio of two chi-square distributions.

Copyright 2012-2014,Simplilearn,All rights reserved


Copyright 2014, Simplilearn, All rights reserved. 114
QUIZ Which of the following is the probability of correctly rejecting the null hypothesis when
11 it is false?

a. Simple linear correlation

b. Power of a test
c. Simple linear regression

d. 1 Sample Sign test

Copyright 2014, Simplilearn, All rights reserved. 115


QUIZ Which of the following is the probability of correctly rejecting the null hypothesis when
11 it is false?

a. Simple linear correlation

b. Power of a test
c. Simple linear regression

d. 1 Sample Sign test

Answer: b.
Explanation: The power of a test is the probability of correctly rejecting the null hypothesis
when it is false.
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Copyright 2014, Simplilearn, All rights reserved. 116
QUIZ Which of the following assumes that the existing sample is randomly taken from a
12 population, with a symmetric frequency distribution around the median?

a. Kruskal-Wallis test

b. Mood’s median test


c. 1 Sample Wilcoxon test

d. Friedman test

Copyright 2014, Simplilearn, All rights reserved. 117


QUIZ Which of the following assumes that the existing sample is randomly taken from a
12 population, with a symmetric frequency distribution around the median?

a. Kruskal-Wallis test

b. Mood’s median test


c. 1 Sample Wilcoxon test

d. Friedman test

Answer: c.
Explanation: 1 Sample Wilcoxon test assumes that the existing sample is randomly taken
from a population, with a symmetric frequency distribution around the median.
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Summary

Here is a quick ● Discrete probability distribution is characterized by the probability mass


recap of what we
function and continuous probability distribution is characterized by the
have learned in this
lesson: probability density function.
● Multi-Vari studies are used to analyze variation in a process.
● Correlation means association between variables. Simple Linear Regression
and Multiple Regression are its two main techniques.
● Hypothesis testing is conducted on different sets of data. Analysis of
variance is used to compare the means of more than two sample sets.
● A t-test is used for 1-sample and 2-sample tests are used for comparing two
means.

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Summary (contd.)

Here is a quick ● The Mann-Whitney or Wilcoxon Rank Sum test is used to compare two
recap of what we
unpaired groups.
have learned in this
lesson: ● The Kruskal–Wallis Test is used for testing the source of origin of samples.
● The Mood’s median test is used to test the equality of medians from two
or more different populations.
● The Friedman test does not make any assumptions on the shape and
origin of the sample.
● The 1 Sample Sign test is the simplest of all the non-parametric tests that
can be used in the place of a 1 sample t-test.

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THANK YOU

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