29-12-2022

Chi-Squared Test
• Chi-squared goodness-of-fit test
• Multinomial Experiments
• Chi-Squared test of a contingency table or Test for
independency
Chi-Squared Test
for When to use:
Categorical Variable

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Chi-Squared Test Illustration

(for goodness-of-fit)
Company A has recently conducted aggressive advertising campaigns to maintain
and possibly increase its share of the market (currently 45%) for fabric softener.
Its main competitor, company B, has 40% of the market, and a number of other
competitors account for the remaining 15%. To determine whether the market
shares changed after the advertising campaign, the marketing manager for

𝐻 : There is no significant difference between Observed and Expected frequencies company A solicited the preferences of a random sample of 200 customers of

𝐻 :There is significant difference between… fabric softener. Of the 200 customers, 102 indicated a preference for company A’s
𝑓 : 𝐹𝑟𝑒𝑞𝑢𝑒𝑛𝑐𝑦
product, 82 preferred company B’s fabric softener, and the remaining 16 preferred
𝑒 : 𝐹𝑟𝑒𝑞𝑢𝑒𝑛𝑐𝑦 the products of one of the competitors. Can the analyst infer at the 5%
𝑘: no. of categories significance level that customer preferences have changed from their levels before
𝐷𝑜𝐹: 𝑘 − 1
the advertising campaigns were launched?

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CHI-SQUARED TEST OF A CONTINGENCY TABLE

Illustration
The MBA program was experiencing problems scheduling its courses. The demand for the program’s
(Test of Independency) optional courses and majors was quite variable from one year to the next. In one year, students seem

• Comparable to cross-classification table for data with nominal measure. to want marketing courses; in other years, accounting or finance are the rage. In desperation, the dean

• The goal for the test is to infer whether two categorical (nominal) variables related of the business school turned to a statistics professor for assistance. The statistics professor believed
with each other or not. that the problem may be the variability in the academic background of the students and that the
• Also, to infer that differences exists or not among two or more population of under- graduate degree affects the choice of major. As a start, he took a random sample of last year’s
nominal variables.
MBA students and recorded the undergraduate degree and the major selected in the graduate
• Hypotheses program. The undergraduate degrees were BA, BEng, BBA, and several others. There are three
•𝐻 : Two variables are independent (There is no relationship) possible majors for the MBA students: accounting, finance, and marketing. The results were

•𝐻 : Two Variables are dependent. summarized in a cross-classification table, which is shown here. Can the statistician conclude that the

• Test Statistics : k is no. of cells in cross-classification table. undergraduate degree affects the choice of major?

Data

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Step 2: Calculate probabilities of variables

Graphical representation

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Step 3: Calculate Expected Frequencies by using Step 4: Preparing the Contingency Table
probabilities in step 1.

Step 5

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Question
Step 6: Decision During the past decade, many cigarette smokers have attempted to quit. Unfortunately, nicotine is
highly addictive. Smokers use a large number of different methods to help them quit. These include
nicotine patches, hypnosis, and various forms of therapy. A researcher for the Addiction Research
Council wanted to determine why some people quit while others attempted to quit but failed. He
surveyed 1,000 people who planned to quit smoking. He determined their educational level and

whether they continued to smoke 1 year later. Educational level was recorded in the following way :

A continuing smoker was recorded as 1; a quitter was recorded as 2. Can we infer that the amount of
education is a factor in determining whether a smoker will quit?

Data

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