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Presented by
Sidhartha Mohapatra,Cuttack

What is Hypothesis ?
Hypothesis simply means mere assumptions.
Hypothesis are statements that can be
empirically tested.
Ex :1. A sales manager may hypothesize that
salespeople who show the highest job
satisfaction will be the most productive.
2. An advertisement manager may believe that
if consumer's attitude toward a product are
changed in a positive direction, consumption
of the product also increases.

Hypothesis Testing
Types of hypothesis commonly in business

research are
1. Relational Hypothesis-examine how changes
in one variable vary with changes in another
2. Hypothesis about difference between
groups-examine how some variable varies
from one group to another
3. Hypothesis about difference from some
standard-examine how some variable differs
from some preconceived standard

The Hypothesis-Testing Procedure

1.Hypothesis is derived from research
2. Sample is obtained and the relevant variable
is measured
3. If the value is consistent with the hypothesis ,
the hypothesis is accepted otherwise rejected

Basics concept concerning testing

Null hypothesis & alternative Hypothesis
The level of significance
Error in hypothesis testing
Two-tailed and one tailed test

I we are to compare method A with method B

Null hypothesis & alternative Hypothesis

about its superiority and if we proceed on the

assumption that both methods are equally
good, then this assumption is termed as the
null hypothesis (H0)
If we think that the method A is superior or
the method B is inferior , we are then stating
what is alternative hypothesis(H1)

The level of significance

The level of significance is always some

percentage(usually 5%) which should be chosen

with great care , thought, and reason. In case we
take the significance level at 5%, then this implies
that H0 will be rejected when the sampling result
has a less than 0.05 probability of occurrence if H 0
is true .Thus the significance level is the maximum
level of the probability of rejecting H0 when it is true
and usually determined before testing the

Error in hypothesis testing

Type I & Type II error
There are basically two types of error we can

make .Type II error means rejection of

hypothesis which should have been accepted
and Type II error means accepting the
hypothesis which should have been rejected

Two-tailed and one tailed test

A two-tailed test rejects the null hypothesis if, the

sample mean is significantly higher or lower than

the hypothesized value of the mean of the
population. Such a test is appropriate when the null
hypothesis is some specified value and the
alternative hypothesis is a value not equal to the
specified value of the null hypothesis.
Symbolically, the two tailed test is appropriate
when we have H0: = H0 and H0: H0 which may
mean > h0 or <H0

Fig. Two tailed test

One tailed test

There are situations when only tailed test is

considered appropriate. A one-tailed test

would be used when we are to test ,say
,whether the population mean is either lower
than or higher than some hypothesied value.
For instance, if our H0: = H0 and
H0: <
H0, then we are interested in what is known as
one-tailed test

One tailed test

Types of hypothesis
1.Parametric test
2.Non-Parametric test
1.Parametric test
Parametric tests involves numbers with known ,Continuous
distributions. Parametric tests are based on the assumption that
the data in the study are drawn from a population with the
normal distribution. When the data are interval scale or ratio
scale & the sample size is large, parametric statistical are
Example :If the investigator has two interval-scaled measured
measures, such as gross national product(GNP)and industry
sales volume, parametric tests are appropriate .Possible
statistics tests include analysis of variance, regression, or a ttest for a hypothesis about a mean

2.Non-Parametric test
Nonparametric methods are used when the

researcher does not know how the data are

distributed. Making the assumption that the
sampling distribution is normal is
inappropriate when the data are either ordinal
or nominal.

Important non-parametric test

Sign test for paired data
Mann-Whitney U-test
One-sample run test
Rank correlation

Illustration of One sample run test

The following is an arrangement of
25 Men, M, and 15 Women, W lined
up to purchase tickets for a
premiere picture show:
Test for randomness at the 5 per
cent level of significance.

Solution: Here n1=25, n2 =15, r=17

1=2n1n2/n1+n2 +1
1=22515/25+15 +1=750/40+1=19.75
1=2n1n2 (2n1n2-n1-n2) / (n1+n2)2(n1+n2-1)
= 22515(22515-25-15)/
Z=r- r/ r

Since this value is less than 1.96(5%

level) the null hypothesis is accepted.
Hence there is no real evidence to
suggest that the arrangement is not

Limitation of Tests of Hypothesis

It should be kept in view that testing are aid for

decision making .
Test do not explain the reasons to why the difference
exist, say between the means of the two sample.
Results of significance test are based on probabilities
and such cannot be expressed with full certainty.
All these limitation suggest that in problems of
statistical significance , the inference technique(or
the tests) must be combined with adequate
knowledge of the subject-matter of the subject
matter along with the ability of good judgment.

Kothari ,C.R, Research Methodology: Methods &

Practices: New Age International(P) Ltd.,2005

Gupta , S.P. ,Statistical Methods :Sultan Chand
Krishnaswamy ,K.N , Sivakumar; and
Mathirajan,M,Management Research Methodology:
Integration of Principle, Methods And Techniques
Adhikary , A ,et al., Business Research Methods :A
South-Asian Perspective: engage Publication

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