Lecture 7: Statistical Inference by Dr.

Javed Iqbal

Test of Hypothesis: Basic Concepts

Often a statistical hypothesis is conjecture, a claim or an assumption about the value of a
population parameter.
Typically, a hypothesis test problem involves two hypotheses: the null hypothesis and the
alternative hypothesis (or research hypothesis), which we define as follows:

Weiss: Definition 9.1 p-390: A hypothesis to be tested for possible rejection is called a null
hypothesis while an alternative (or a research hypothesis) is the one which is accepted when the
null hypothesis is rejected.

Choosing null and alternative hypotheses: some examples

Null hypothesis is often set as a status quo, while the alternative hypothesis is the one which
motivates for change or improvement.

In today’s highly competitive business environment, successful companies stay competitive by

developing new products, new methods, new systems, and the like, that are better than what is
currently available. Before adopting something new, it is desirable to conduct research to
determine if there is statistical support for the conclusion that the new approach is indeed better.
In such cases, the research hypothesis is stated as the alternative hypothesis. Some examples:

(1). A new sales force bonus plan is developed in an attempt to increase sales. The alternative
hypothesis is that the new bonus plan increases average sales. The null hypothesis is that the new
bonus plan does not increase average sales (i.e. a status quo).

(2). A new drug is developed with the goal of lowering average blood pressure more than an
existing drug. The alternative hypothesis is that the new drug lowers blood pressure more than the
existing drug. The null hypothesis is that the new drug does not provide lower average blood
pressure than the existing drug on average (i.e. a status quo).

(3). A new teaching method is developed that is believed to be better (i.e. measured by student’s
average grade) than the current method. The alternative hypothesis is that the new method is better.
The null hypothesis is that the new method is no better than the old one (i.e. status quo).

In each of these cases, rejection of the null hypothesis H0 provides statistical support for the
research hypothesis. In the examples and exercises that follow the parameter under study is
population mean i.e. 𝜇. The alternative can be either one tailed test (right tail test) 𝜇 > 𝜇0 , or one
tailed (left tail test) 𝜇 < 𝜇0 , or a two sided alternative 𝜇 ≠ 𝜇0 , (two tail test).
A useful practical tip: Sometimes setting up of null and alternative hypothesis can be confusing
for some students. Here is a practical tip.

Null hypothesis has some sense of equality ≥ or ≤ or =

Alternative hypothesis is associated with strict inequality > or < or ≠

Ex1: Population mean is at least 5 i.e. 𝜇 ≥ 5 must be in null hypothesis and the complement of it
i.e. 𝜇 < 5 should then be in the alternative.

Ex2: Where should we place these statements?

(i) population proportion (p) is more than 75% (ii) Population mean is less than 10.
(ii) Population proportion is no more than 60%

Weiss, p-391: Example 9.1, 9.2, 9.3

Anderson pdf p-452: Exercises 1, 2, 3

Type I and Type II errors:

All hypothesis tests about population parameters involve sample data to help reject or not reject
the null hypothesis. Because of the use of sample data, some error is likely to occur which may
lead to wrong decision i.e.

True null hypothesis may be wrongly rejected:

(Type I error: )

False null hypothesis may not be rejected:

(Type II error: )

We also frequently come across Type I and II errors in our lives.

(1) A meritorious player is not selected in the team (Type I error)

(2) A court punishes an innocent person (Type I error)
(3) A non-meritorious player is selected in the team (Type II error)
(4) A court releases free a criminal (Type II error)

Weiss p-393, Table 9.1 and Definition 9.2

Weiss Example 9.4
Weiss Definition 9.3 p-395: Level of significance:

𝜶: Probability of making a type I error

𝜷: Probability of making a Type II error
𝟏 − 𝜷: Probability of correctly rejecting the null hypothesis is called Power of the test

Andersen pdf p-454 Ex 5,6,7