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REFERENCE

and Wathen, 16th edition

2

OVERVIEW

The F Distribution

Comparing Two Population Variances

The ANOVA Test

3

THE F DISTRIBUTION

The distribution is:

Used to test a hypothesis of equal population variances.

Used to simultaneously test a hypothesis that several populati

on means are equal. The simultaneous comparison of several

population means is called analysis of variance (ANOVA).

4

CHARACTERISTICS OF

A F - DISTRIBUTION

1. There is a family of F Distributio

ns. A particular member of the fa

mily is determined by two param

eters: the degrees of freedom in t

he numerator and the degrees of

freedom in the denominator.

2. The F distribution is continuous

3. F value cannot be negative.

4 The F distribution is positively sk

ewed.

5. It is asymptotic. As F the cur

ve approaches the X-axis but nev

er touches it.

5

COMPARING TWO POP

ULATION VARIANCES

The F distribution is used to test the hypothesis that the variance

of one normal population equals the variance of another normal p

opulation.

Example:

The mean rate of return on two types of common stock may be th

e same, but there may be more variation in the rate of return in on

e than the other. A sample of 10 technology and 10 utility stocks s

hows the same mean rate of return, but there is likely more variati

on in the Internet stocks.

6

TEST FOR EQUAL VAR

IANCES

H 0 : 12 22

H1 : 12 22

To conduct the test, we select a random sample of n1 observation

s from one population, and a random sample of n2 observations fr

om the second population. The test statistics is defined as follows:

s12

F 2

s2

7

TEST FOR EQUAL VAR

IANCES

The term s12 and s22 are the respective sample variances.

If the null hypothesis is true, the test statistic follows the F distribut

ion with n1 - 1 and n2 - 1 degrees of freedom.

In order to reduce the size of the table of critical values, the larger

sample variance is placed in the numerator. The tabled F ratio is a

lways larger than 1.00. The right-tail critical value is the only one r

equired.

8

TEST FOR EQUAL VAR

IANCES

Lammers Limos offers limousine servi

ce from the city hall in Toledo, Ohio, to

Metro Airport in Detroit. The president

of the company, is considering two rou

tes. One is via U.S. 25 and the other vi

a I-75. He wants to study the time it ta

kes to drive to the airport using each r

oute and then compare the results. He

collected the following sample data, w

hich is reported in minutes.

Using the .10 significance level, is ther

e a difference in the variation in the dri

ving times for the two routes?

9

TEST FOR EQUAL VAR

IANCES

10

TEST FOR EQUAL VAR

IANCES

Step 1: The hypotheses are:

H0: 12 = 22

H1: 12 22

11

TEST FOR EQUAL VAR

IANCES

Step 4: State the decision rule.

This is a two-tailed test, divide by 2: 0.1/2 = 0.05.

There are n1 - 1 = 7 1 = 6 degrees of freedom in the numerator.

There are n2 - 1 = 8 1 = 7 degrees of freedom in the denominato

r.

Based on these information, the critical value = 3.87.

Reject H0 if F > 3.87.

12

TEST FOR EQUAL VAR

IANCES

13

TEST FOR EQUAL VAR

IANCES

Step 5: Compute the value of F and make a decision.

d F value (4.23) is larger than the critical value (3.87).

The data indicates that there is a difference in the variation of the

travel times along the two routes.

14

TEST FOR EQUAL VAR

IANCES

A stock broker at Critical Securities reported that the mean rate of

return on the sample of 10 oil stocks was 12.6 percent with a stan

dard deviation of 3.9 percent. The mean rate of return on a sampl

e of 8 utility stocks was 10.9 percent with a standard deviation of

3.5 percent. At the 0.05 significance level, can we conclude that th

ere is more variation in the oil stocks?

15

TEST FOR EQUAL VAR

IANCES

Step 1: The hypotheses are:

H0: 12 22

H1: 12 > 22

16

TEST FOR EQUAL VAR

IANCES

Step 4: State the decision rule.

This is a one-tailed test, = 0.05.

There are n1 - 1 = 10 1 = 9 degrees of freedom in the numerato

r.

There are n2 - 1 = 8 1 = 7 degrees of freedom in the denominato

r.

Based on these information, the critical value = 3.68.

Reject H0 if F > 3.68.

17

TEST FOR EQUAL VAR

IANCES

Step 5: Compute the value of F and make a decision

s12 0.039

2

F 2 1.24

s2 0.035 2

The decision is not to reject the null hypothesis, because the com

puted F value (1.24) is less than the critical value (3.68).

Based on the sample evidence, we conclude that oil stocks return

s do not have more variation.

18

COMPARING MEANS OF TH

REE OR MORE POPULATIO

NS

The F distribution is also used in the analysis of variance (ANOV

A) technique in which we compare three or more population mean

s to determine whether they could be equal.

Assumptions:

1. The populations follow the normal distribution.

2. The populations have equal standard deviations .

3. The populations are independent.

19

COMPARING MEANS OF TH

REE OR MORE POPULATIO

NS

The Null Hypothesis is that the population means are all the sam

e. The Alternative Hypothesis is that at least one of the means is

different.

The Test Statistic is the F distribution.

The Decision rule is to reject the null hypothesis if F (computed) i

s greater than F (table) with numerator and denominator degrees

of freedom.

Hypothesis Setup and Decision Rule:

H0: 1 = 2 == k

H1: The means are not all equal

20

ANALYSIS OF VARIAN

CE

If there are k populations being sampled, the numerator degrees

of freedom is k 1.

eedom is n k.

21

ANALYSIS OF VARIAN

CE

Grand Mean:

X is each sample observation.

22

ANALYSIS OF VARIAN

CE

Total Variation (SS Total)

The sum of the squared differences between each observation an

d the grand mean

23

ANALYSIS OF VARIAN

CE

Treatment Variation (SST)

The sum of the squared differences between each treatment mea

n and the grand mean

The sum of the squared differences between each observation an

d its treatment mean.

24

ANALYSIS OF VARIAN

CE

25

ANALYSIS OF VARIAN

CE

A real estate developer is considering investing in a shopping mail

on the outskirts of Atlanta, Georgia. Three parcels of land are bein

g evaluated. Of particular importance is the income in the area su

rrounding the proposed mail. A random sample of four families is

selected near each proposed mail. Following are the sample resul

ts. At the 0.05 significance level, can the developer conclude ther

e is a difference in the mean income?

($000) ($000) ($000)

64 74 75

68 71 80

70 69 76

60 70 78

26

ANALYSIS OF VARIAN

CE

Step 1: State the null and alternate hypotheses.

H0: 1 = 2 = 3

H1: The means are not all equal

The .05 significance level is stated in the problem.

Use the F statistic

27

ANALYSIS OF VARIAN

CE

Step 4: State the decision rule.

= 0.05

28

ANALYSIS OF VARIAN

CE

Step 5: Compute the value of F and make a decision

29

ANALYSIS OF VARIAN

CE

Compute total variation (SS Total)

30

ANALYSIS OF VARIAN

CE

Compute random variation (SSE)

31

ANALYSIS OF VARIAN

CE

32

ANALYSIS OF VARIAN

CE

Based on the sample evidence, we can conclude that the mean in

comes are not all equal.

33

THE ANOVA TABLE

It is convenient to summarize the calculations of the F statistic in

an ANOVA table. The format is as follows:

ANOVA Table

Source of Sum of Squares Degrees of Mean Square F

Variation Freedom

Treatments SST k1 MST MST/MSE

Error SSE nk MSE

Total SS Total n1

34

THE ANOVA TABLE

Substituting the information from the previous example in the AN

OVA table.

ANOVA Table

Source of Sum of Squares Degrees of Mean Square F

Variation Freedom

Treatments 276.5 2 138.25 14.18

Error 87.75 9 9.75

Total 364.25 11

35

ANALYSIS OF VARIAN

CE

Three assemble lines are used to produce a certain component fo

r an airliner. To examine the production rate, a random sample of

six hourly periods is chosen for each assembly line and the numb

er of components produced during these periods for each line is r

ecorded. The output from a statistical software package is:

Summary

36

ANALYSIS OF VARIAN

CE

ANOVA Table

Source of Sum of Squares Degrees of Mean Square F

Variation Freedom

Between Groups 12.33333 2 6.166667 11.32653

Within Groups 8.166667 15 0.544444

Total 20.5 17

e mean production of the three assembly lines.

37

ANALYSIS OF VARIAN

CE

Step 1: State the null and alternate hypotheses.

H0: 1 = 2 = 3

H1: The mean productions are not all equal

The .01 significance level is stated in the problem.

Use the F statistic

38

ANALYSIS OF VARIAN

CE

Step 4: State the decision rule.

Denominator degrees of freedom = n k = 15

Based on the above information, the critical value = 6.36

Reject H0 if F > 6.36

39

ANALYSIS OF VARIAN

CE

Step 5: Compute the value of F and make a decision

From the ANOVA table, F = 11.32653

Since F > 6.36, reject H0

Based on the sample evidence, we can conclude that the mean p

roductions are not all equal.

40

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