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JOHN S. LOUCKS

St. Edward’s University

© 2005 Thomson/South-Western

Slide 1

**Chapter 19 Nonparametric Methods
**

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Sign Test Wilcoxon Signed-Rank Test Mann-Whitney-Wilcoxon Test Kruskal-Wallis Test Rank Correlation

© 2005 Thomson/South-Western

Slide 2

Nonparametric Methods

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Most of the statistical methods referred to as parametric require the use of interval- or ratio-scaled data. Nonparametric methods are often the only way to analyze nominal or ordinal data and draw statistical conclusions. Nonparametric methods require no assumptions about the population probability distributions. Nonparametric methods are often called distributionfree methods.

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© 2005 Thomson/South-Western

Slide 3

Nonparametric Methods

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In general, for a statistical method to be classified as nonparametric, it must satisfy at least one of the following conditions. • The method can be used with nominal data. • The method can be used with ordinal data. • The method can be used with interval or ratio data when no assumption can be made about the population probability distribution.

© 2005 Thomson/South-Western

Slide 4

Sign Test

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A common application of the sign test involves using a sample of n potential customers to identify a preference for one of two brands of a product. The objective is to determine whether there is a difference in preference between the two items being compared. To record the preference data, we use a plus sign if the individual prefers one brand and a minus sign if the individual prefers the other brand. Because the data are recorded as plus and minus signs, this test is called the sign test.

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© 2005 Thomson/South-Western

Slide 5

**Sign Test: Small-Sample Case
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The small-sample case for the sign test should be used whenever n < 20. The hypotheses are H 0 : p = .50 No preference for one brand over the other exists. H a : p ≠ .50 A preference for one brand over the other exists. The number of plus signs is our test statistic. Assuming H0 is true, the sampling distribution for the test statistic is a binomial distribution with p = .5. H0 is rejected if the p-value < level of significance, α.

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© 2005 Thomson/South-Western

Slide 6

**Sign Test: Large-Sample Case
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Using H0: p = .5 and n > 20, the sampling distribution for the number of plus signs can be approximated by a normal distribution. When no preference is stated (H0: p = .5), the sampling distribution will have: Mean: µ = .50n Standard Deviation: σ = .25n

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The test statistic is:

x−µ z= σ

(x is the number of plus signs)

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**H0 is rejected if the p-value < level of significance, α.
**

Slide 7

© 2005 Thomson/South-Western

**Sign Test: Large-Sample Case
**

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Example: Ketchup Taste Test As part of a market research study, a sample of 36 consumers were asked to taste two brands of ketchup and indicate a preference. Do the data shown on the next slide indicate a significant difference in the consumer preferences for the two brands?

A

B

© 2005 Thomson/South-Western

Slide 8

**Sign Test: Large-Sample Case
**

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Example: Ketchup Taste Test 1 preferred Brand A Ketchup (+ sign recorded) 1 preferred Brand B Ketchup (_ sign recorded) 6 had no preference The analysis will be based on a sample size of 18 + 12 = 30.

A

B

© 2005 Thomson/South-Western

Slide 9

**Sign Test: Large-Sample Case
**

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Hypotheses H 0 : p = .50

A B

No preference for one brand over the other exists H a : p ≠ .50 A preference for one brand over the other exists

© 2005 Thomson/South-Western

Slide 10

**Sign Test: Large-Sample Case
**

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Sampling Distribution for Number of Plus Signs

A B

σ = .25n = .25(30) = 2.74

µ = .5(30) = 15

© 2005 Thomson/South-Western

Slide 11

**Sign Test: Large-Sample Case
**

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Rejection Rule Using .05 level of significance: Reject H0 if p-value < .05 Test Statistic z = (x – µ)/σ = (18 - 15)/2.74 = 3/2.74 = 1.10

A B

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p-Value p-Value = 2(.5000 - .3643) = .2714

© 2005 Thomson/South-Western

Slide 12

**Sign Test: Large-Sample Case
**

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A B Conclusion Because the p-value > α, we cannot reject H0. There is insufficient evidence in the sample to conclude that a difference in preference exists for the two brands of ketchup.

© 2005 Thomson/South-Western

Slide 13

**Hypothesis Test About a Median
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We can apply the sign test by: • Using a plus sign whenever the data in the sample are above the hypothesized value of the median • Using a minus sign whenever the data in the sample are below the hypothesized value of the median • Discarding any data exactly equal to the hypothesized median

© 2005 Thomson/South-Western

Slide 14

**Hypothesis Test About a Median
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Example: Trim Fitness Center A hypothesis test is being conducted about the median age of female members of the Trim Fitness Center. H0: Median Age = 34 years Ha: Median Age ≠ 34 years In a sample of 40 female members, 25 are older than 34, 14 are younger than 34, and 1 is 34. Is there sufficient evidence to reject H0? Assume α = .05.

© 2005 Thomson/South-Western

Slide 15

**Hypothesis Test About a Median
**

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Mean and Standard Deviation µ = .5(39) = 19.5

σ = .25n = .25(39) = 3.12

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Test Statistic z = (x – µ)/σ = (25 – 19.5)/3.12 = 1.76

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p-Value p-Value = 2(.5000 − .4608) = .0784

© 2005 Thomson/South-Western

Slide 16

**Hypothesis Test About a Median
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Rejection Rule Using .05 level of significance: Reject H0 if p-value < .05 Conclusion Do not reject H0. The p-value for this two-tail test is .0784. There is insufficient evidence in the sample to conclude that the median age is not 34 for female members of Trim Fitness Center.

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© 2005 Thomson/South-Western

Slide 17

**Wilcoxon Signed-Rank Test
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This test is the nonparametric alternative to the parametric matched-sample test presented in Chapter 10. The methodology of the parametric matched-sample analysis requires: • interval data, and • the assumption that the population of differences between the pairs of observations is normally distributed. If the assumption of normally distributed differences is not appropriate, the Wilcoxon signed-rank test can be used.

© 2005 Thomson/South-Western

Slide 18

**Wilcoxon Signed-Rank Test
**

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Example: Express Deliveries A firm has decided to select one of two express delivery services to provide next-day deliveries to its district offices. To test the delivery times of the two services, the firm sends two reports to a sample of 10 district offices, with one report carried by one service and the other report carried by the second service. Do the data on the next slide indicate a difference in the two services?

Slide 19

© 2005 Thomson/South-Western

**Wilcoxon Signed-Rank Test
**

District Office Seattle Los Angeles Boston Cleveland New York Houston Atlanta St. Louis Milwaukee Denver

© 2005 Thomson/South-Western

OverNight NiteFlite 32 hrs. 25 hrs. 30 24 19 15 16 15 15 13 18 15 14 15 10 8 7 9 16 11

Slide 20

**Wilcoxon Signed-Rank Test
**

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Preliminary Steps of the Test • Compute the differences between the paired observations. • Discard any differences of zero. • Rank the absolute value of the differences from lowest to highest. Tied differences are assigned the average ranking of their positions. • Give the ranks the sign of the original difference in the data. • Sum the signed ranks. . . . next we will determine whether the sum is significantly different from zero.

© 2005 Thomson/South-Western

Slide 21

**Wilcoxon Signed-Rank Test
**

District Office Seattle Los Angeles Boston Cleveland New York Houston Atlanta St. Louis Milwaukee Denver Differ. |Diff.| Rank Sign. Rank 7 10 +10 6 9 +9 4 7 +7 1 1.5 +1.5 2 4 +4 3 6 +6 −1 1.5 −1.5 2 4 +4 −2 4 −4 5 8 +8 +44

Slide 22

© 2005 Thomson/South-Western

**Wilcoxon Signed-Rank Test
**

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Hypotheses H0: The delivery times of the two services are the same; neither offers faster service than the other. Ha: Delivery times differ between the two services; recommend the one with the smaller times.

© 2005 Thomson/South-Western

Slide 23

**Wilcoxon Signed-Rank Test
**

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Sampling Distribution of T for Identical Populations

n(n + 1)(2 n + 1) 10(11)(21) σT = = = 19.62 6 6

µT = 0

T

© 2005 Thomson/South-Western

Slide 24

**Wilcoxon Signed-Rank Test
**

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Rejection Rule Using .05 level of significance, Reject H0 if p-value < .05 Test Statistic z = (T - µT )/σT = (44 - 0)/19.62 = 2.24 p-Value p-Value = 2(.5000 - .4875) = .025

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© 2005 Thomson/South-Western

Slide 25

**Wilcoxon Signed-Rank Test
**

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Conclusion Reject H0. The p-value for this two-tail test is .025. There is sufficient evidence in the sample to conclude that a difference exists in the delivery times provided by the two services.

© 2005 Thomson/South-Western

Slide 26

**Mann-Whitney-Wilcoxon Test
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This test is another nonparametric method for determining whether there is a difference between two populations. This test, unlike the Wilcoxon signed-rank test, is not based on a matched sample. This test does not require interval data or the assumption that both populations are normally distributed. The only requirement is that the measurement scale for the data is at least ordinal.

© 2005 Thomson/South-Western

Slide 27

**Mann-Whitney-Wilcoxon Test
**

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Instead of testing for the difference between the means of two populations, this method tests to determine whether the two populations are identical. The hypotheses are: H0: Ha: The two populations are identical The two populations are not identical

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© 2005 Thomson/South-Western

Slide 28

**Mann-Whitney-Wilcoxon Test
**

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Example: Westin Freezers Manufacturer labels indicate the annual energy cost associated with operating home appliances such as freezers. The energy costs for a sample of 10 Westin freezers and a sample of 10 Easton Freezers are shown on the next slide. Do the data indicate, using α = .05, that a difference exists in the annual energy costs for the two brands of freezers?

© 2005 Thomson/South-Western

Slide 29

**Mann-Whitney-Wilcoxon Test
**

Westin Freezers $55.10 54.50 53.20 53.00 55.50 54.90 55.80 54.00 54.20 55.20

© 2005 Thomson/South-Western

Easton Freezers $56.10 54.70 54.40 55.40 54.10 56.00 55.50 55.00 54.30 57.00

Slide 30

**Mann-Whitney-Wilcoxon Test
**

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Hypotheses H0: Annual energy costs for Westin freezers and Easton freezers are the same. Ha: Annual energy costs differ for the two brands of freezers.

© 2005 Thomson/South-Western

Slide 31

**Mann-Whitney-Wilcoxon Test: Large-Sample Case
**

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First, rank the combined data from the lowest to the highest values, with tied values being assigned the average of the tied rankings. Then, compute T, the sum of the ranks for the first sample. Then, compare the observed value of T to the sampling distribution of T for identical populations. The value of the standardized test statistic z will provide the basis for deciding whether to reject H0.

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© 2005 Thomson/South-Western

Slide 32

**Mann-Whitney-Wilcoxon Test: Large-Sample Case
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Sampling Distribution of T for Identical Populations

• Mean

µT = n1(n1 + n2 + 1)

• Standard Deviation

σ T = 1 12 n1 n2 (n1 + n2 + 1)

• Distribution Form

Approximately normal, provided n1 > 10 and n2 > 10

© 2005 Thomson/South-Western

Slide 33

**Mann-Whitney-Wilcoxon Test
**

Westin Freezers Rank 12 $55.10 8 54.50 2 53.20 1 15.5 53.00 55.50 10 17 54.90 3 55.80 5 54.00 13 54.20 Sum of Ranks 86.5 55.20

© 2005 Thomson/South-Western

**Easton Freezers Rank $56.10 19 54.70 9 54.40 7 55.40 14 54.10 4 18 56.00 15.5 55.50 11 55.00 6 54.30 20 57.00 Sum of Ranks 123.5
**

Slide 34

**Mann-Whitney-Wilcoxon Test
**

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Sampling Distribution of T for Identical Populations

σ T = 1 12 n1 n2 (n1 + n2 + 1) = 1 12 (10)(10)(21) = 13.23

µT = ½(10)(21) = 105

T

© 2005 Thomson/South-Western

Slide 35

**Mann-Whitney-Wilcoxon Test
**

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Rejection Rule Using .05 level of significance, Reject H0 if p-value < .05 Test Statistic z = (T - µT )/σT = (86.5 − 105)/13.23 = -1.40 p-Value p-Value = 2(.5000 - .4192) = .1616

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© 2005 Thomson/South-Western

Slide 36

**Mann-Whitney-Wilcoxon Test
**

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Conclusion Do not reject H0. The p-value > α. There is insufficient evidence in the sample data to conclude that there is a difference in the annual energy cost associated with the two brands of freezers.

© 2005 Thomson/South-Western

Slide 37

**Kruskal-Wallis Test
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The Mann-Whitney-Wilcoxon test has been extended by Kruskal and Wallis for cases of three or more populations. H0: All populations are identical Ha: Not all populations are identical

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The Kruskal-Wallis test can be used with ordinal data as well as with interval or ratio data. Also, the Kruskal-Wallis test does not require the assumption of normally distributed populations.

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© 2005 Thomson/South-Western

Slide 38

**Kruskal-Wallis Test
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Test Statistic

k Ri2 12 W = ∑ n − 3(nT + 1) nT (nT + 1) i =1 i

where: k = number of populations ni = number of items in sample i nT = Σni = total number of items in all samples Ri = sum of the ranks for sample i

© 2005 Thomson/South-Western

Slide 39

**Kruskal-Wallis Test
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When the populations are identical, the sampling distribution of the test statistic W can be approximated by a chi-square distribution with k – 1 degrees of freedom. This approximation is acceptable if each of the sample sizes ni is > 5. The rejection rule is: Reject H0 if p-value < α

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© 2005 Thomson/South-Western

Slide 40

Rank Correlation

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The Pearson correlation coefficient, r, is a measure of the linear association between two variables for which interval or ratio data are available. The Spearman rank-correlation coefficient, rs , is a measure of association between two variables when only ordinal data are available. Values of rs can range from –1.0 to +1.0, where • values near 1.0 indicate a strong positive association between the rankings, and • values near -1.0 indicate a strong negative association between the rankings.

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© 2005 Thomson/South-Western

Slide 41

Rank Correlation

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**Spearman Rank-Correlation Coefficient, rs
**

rs = 1 − 6∑ di2

n( n2 − 1)

where: n = number of items being ranked xi = rank of item i with respect to one variable yi = rank of item i with respect to a second variable di = xi - yi

© 2005 Thomson/South-Western

Slide 42

**Test for Significant Rank Correlation
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We may want to use sample results to make an inference about the population rank correlation ps. To do so, we must test the hypotheses:

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H 0 : ps = 0 (No rank correlation exists) H a : ps ≠ 0 (Rank correlation exists)

© 2005 Thomson/South-Western

Slide 43

Rank Correlation

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Sampling Distribution of rs when ps = 0

• Mean

µrs = 0

• Standard Deviation

1 σ rs = n−1

• Distribution Form

Approximately normal, provided n > 10

© 2005 Thomson/South-Western

Slide 44

Rank Correlation

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Example: Crennor Investors Crennor Investors provides a portfolio management service for its clients. Two of Crennor’s analysts ranked ten investments as shown on the next slide. Use rank correlation, with α = .10, to comment on the agreement of the two analysts’ rankings.

© 2005 Thomson/South-Western

Slide 45

Rank Correlation

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Example: Crennor Investors

• Analysts’ Rankings

Investment A Analyst #1 Analyst #2 1 1 B 4 5 C 9 6 D 8 2 E 6 9 F 3 7 G H 5 7 3 10 I 4 J 8 2 10

• Hypotheses

H 0 : ps = 0 (No rank correlation exists) H a : ps ≠ 0 (Rank correlation exists)

© 2005 Thomson/South-Western

Slide 46

Rank Correlation

Analyst #1 Analyst #2 Ranking Differ. (Differ.)2 Investment Ranking A 1 1 0 0 B 4 5 -1 1 C 9 6 3 9 D 8 2 6 36 E 6 9 -3 9 F 3 7 -4 16 G 5 3 2 4 H 7 10 -3 9 I 2 4 -2 4 J 10 8 2 4 Sum = 92

© 2005 Thomson/South-Western Slide 47

Rank Correlation

Sampling Distribution of rs Assuming No Rank Correlation

1 σ rs = = .333 10 − 1

µr = 0

© 2005 Thomson/South-Western

rs

Slide 48

Rank Correlation

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Rejection Rule With .10 level of significance: Reject H0 if p-value < .10

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Test Statistic

rs = 1 −

n(n 2 − 1)

6∑ di2

=1−

6(92) = 0.4424 10(100 − 1)

z = (rs - µr )/σr = (.4424 - 0)/.3333 = 1.33

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p-Value p-Value = 2(.5000 - .4082) = .1836

© 2005 Thomson/South-Western

Slide 49

Rank Correlation

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Conclusion Do no reject H0. The p-value > α. There is not a significant rank correlation. The two analysts are not showing agreement in their ranking of the risk associated with the different investments.

© 2005 Thomson/South-Western

Slide 50

End of Chapter 19

© 2005 Thomson/South-Western

Slide 51

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- QM Ch 5 Conf Interval
- QM Ch 3 Sampl Distr
- QM Cases Handout
- Probablity Distributions
- Standard Error of the Mean Central Limit Theorem

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