Statistics for Managers

Using Microsoft® Excel

5th Edition

Chapter 10
Two-Sample Tests

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-1
 Learning Objectives

In this chapter, you learn how to use hypothesis

testing for comparing the difference between:
 The means of two independent populations
 The means of two related populations
 The proportions of two independent
populations
 The variances of two independent
populations

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-2
 Two-Sample Tests Overview

Two Sample Tests

Independent Means, Independent Independent

Population Related Population Population
Means Populations Proportions Variances

Examples
Group 1 vs. Same group Proportion 1vs. Variance 1 vs.
Group 2 before vs. after Proportion 2 Variance 2
treatment

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-3
 Two-Sample Tests

Goal: Test hypothesis or form

Independent a confidence interval for the
Population Means
difference between two
population means, μ1 – μ2
σ1 and σ2 known
The point estimate for the
σ1 and σ2 unknown difference between sample
means:
X1 – X2

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-4
 Two-Sample Tests
Independent Populations
 Different data sources
Independent  Independent: Sample selected
Population Means from one population has no
effect on the sample selected
from the other population
σ1 and σ2 known  Use the difference between 2
sample means
 Use Z test, pooled variance t
σ1 and σ2 unknown
test, or separate-variance t test

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-5
 Two-Sample Tests
Independent Populations

Independent
Population Means

σ1 and σ2 known Use a Z test statistic

Use S to estimate unknown σ,

σ1 and σ2 unknown use a t test statistic

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-6
 Two-Sample Tests
Independent Populations
Assumptions:
Independent
Population Means  Samples are randomly and
independently drawn

σ1 and σ2 known  population distributions are

normal
σ1 and σ2 unknown

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-7
 Two-Sample Tests
Independent Populations
When σ1 and σ2 are known and both
Independent populations are normal, the test
Population Means statistic is a Z-value and the
standard error of X1 – X2 is

σ1 and σ2 known
2 2
σ1 σ 2
σ1 and σ2 unknown σ X1  X 2  
n1 n 2

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-8
 Two-Sample Tests
Independent Populations

Independent The test statistic is:

Population Means

σ1 and σ2 known Z
 X X  μ
1 2 1  μ2 
2 2
σ1 σ 2

σ1 and σ2 unknown n1 n 2

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-9
 Two-Sample Tests
Independent Populations

Two Independent Populations, Comparing Means

Lower-tail test: Upper-tail test: Two-tail test:

H0: μ1  μ2 H0: μ1 ≤ μ2 H0: μ1 = μ2

H1: μ1 < μ2 H1: μ1 > μ2 H1: μ1 ≠ μ2
i.e., i.e., i.e.,
H0: μ1 – μ2  0 H0: μ1 – μ2 ≤ 0 H0: μ1 – μ2 = 0
H1: μ1 – μ2 < 0 H1: μ1 – μ2 > 0 H1: μ1 – μ2 ≠ 0

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-10
 Two-Sample Tests
Independent Populations
Two Independent Populations, Comparing Means
Lower-tail test: Upper-tail test: Two-tail test:
H0: μ1 – μ2  0 H0: μ1 – μ2 ≤ 0 H0: μ1 – μ2 = 0
H1: μ1 – μ2 < 0 H1: μ1 – μ2 > 0 H1: μ1 – μ2 ≠ 0
  /2 /2

-z z -z/2 z/2

Reject H0 if Z < -Za Reject H0 if Z > Za Reject H0 if Z < -Za/2

or Z > Za/2

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-11
 Two-Sample Tests
Independent Populations

Independent Assumptions:
Population Means  Samples are randomly and
independently drawn

σ1 and σ2 known  Populations are normally

distributed
σ1 and σ2 unknown  Population variances are
unknown but assumed equal

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-12
 Two-Sample Tests
Independent Populations
Forming interval estimates:
Independent
Population Means  The population variances
are assumed equal, so use
the two sample standard
σ1 and σ2 known deviations and pool them to
estimate σ
σ1 and σ2 unknown  the test statistic is a t value
with (n1 + n2 – 2) degrees
of freedom
Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-13
 Two-Sample Tests
Independent Populations

Independent
Population Means
The pooled standard
deviation is:
σ1 and σ2 known

Sp 
 n1  1S1   n 2  1S2
2 2

σ1 and σ2 unknown (n1  1)  (n 2  1)

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-14
 Two-Sample Tests
Independent Populations
The test statistic is:
Independent
Population Means
t
 X X  μ
1 2 1  μ2 
1 1 
S   
2
p
σ1 and σ2 known  n1 n 2 

Where t has (n1 + n2 – 2) d.f., and

σ1 and σ2 unknown

S2  1
n  1 S1
2
  n 2  1 S 2
2

p
(n1  1)  (n2  1)

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-15
 Two-Sample Tests
Independent Populations
You are a financial analyst for a brokerage firm. Is there a
difference in dividend yield between stocks listed on the
NYSE & NASDAQ? You collect the following data:
NYSE NASDAQ
Number 21 25
Sample mean 3.27 2.53
Sample std dev 1.30 1.16

Assuming both populations are approximately normal with equal

variances, is there a difference in average yield ( = 0.05)?

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-16
 Two-Sample Tests
Independent Populations
The test statistic is:

t
 X 1 
 X 2   μ1  μ2 

 3.27  2.53   0  2.040
1 1  1 1 
S   
2
p
1.5021  
 n1 n2   21 25 

S 
2  n1  1 S1
2
  n 2  1 S 2
2

 21  11.30 2   25  11.16 2
 1.5021
p
(n1  1)  (n2  1) (21 - 1)  (25  1)

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-17
 Two-Sample Tests
Independent Populations
 H0: μ1 - μ2 = 0 i.e. (μ1 = μ2) Reject H0 Reject H0

 H1: μ1 - μ2 ≠ 0 i.e. (μ1 ≠ μ2)

  = 0.05 .025 .025

 df = 21 + 25 - 2 = 44 -2.0154 0 2.0154 t
 Critical Values: t = ± 2.0154
2.040
 Test Statistic: 2.040
Decision: Reject H0 at α = 0.05

Conclusion: There is evidence

of a difference in the means.

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-18
 Independent Populations
Unequal Variance
 If you cannot assume population variances
are equal, the pooled-variance t test is
inappropriate
 Instead, use a separate-variance t test, which
includes the two separate sample variances in
the computation of the test statistic
 The computations are complicated and are
best performed using Excel

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-19
 Two-Sample Tests
Independent Populations

Independent The confidence interval for

Population Means μ1 – μ2 is:

 
2 2
σ1 σ 2
σ1 and σ2 known X1  X 2  Z 
n1 n 2
σ1 and σ2 unknown

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-20
 Two-Sample Tests
Independent Populations
The confidence interval for
Independent
μ1 – μ2 is:
Population Means

 X X   t
1 2 n1  n 2 - 2 p
1 1 
S   
2

σ1 and σ2 known  n1 n 2 
Where

σ1 and σ2 unknown

S2  1
n  1 S1
2
  n 2  1 S 2
2

p
(n1  1)  (n2  1)

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-21
 Two-Sample Tests
Related Populations
Tests Means of 2 Related Populations
 Paired or matched samples
 Repeated measures (before/after)
 Use difference between paired values:
D = X1 - X 2
 Eliminates Variation Among Subjects
 Assumptions:
 Both Populations Are Normally Distributed

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-22
 Two-Sample Tests
Related Populations
The ith paired difference is Di , where

Di = X1i - X2i
The point estimate for the population mean
paired difference is D :
n

D i
D i 1
n
Suppose the population standard deviation of
the difference scores, σD, is known.
Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-23
 Two-Sample Tests
Related Populations
The test statistic for the mean difference is a Z
value:
D  μD
Z
σD
n

Where
μD = hypothesized mean difference
σD = population standard deviation of differences
n = the sample size (number of pairs)

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-24
 Two-Sample Tests
Related Populations
If σD is unknown, you can estimate the
unknown population standard deviation with a
sample standard deviation:

 i
(D  D ) 2

SD  i 1
n 1

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-25
 Two-Sample Tests
Related Populations
The test statistic for D is now a t statistic:
D  μD
t
SD
n

n
Where t has n - 1 d.f.  i
(D  D ) 2

and SD is: SD  i1

n 1

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-26
 Two-Sample Tests
Related Populations
Lower-tail test: Upper-tail test: Two-tail test:

H0: μD  0 H0: μD ≤ 0 H0: μD = 0

H1: μD < 0 H1: μD > 0 H1: μD ≠ 0

  /2 /2

-t t -t/2 t/2

Reject H0 if t < -ta Reject H0 if t > ta Reject H0 if t < -ta/2

or t > ta/2
Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-27
 Two-Sample Tests
Related Populations Example
Assume you send your salespeople to a “customer
service” training workshop. Has the training made a
difference in the number of complaints? You collect the
following data:
Salesperson Number of Complaints Difference, Di
Before (1) After (2) (2-1)

C.B. 6 4 -2
T.F. 20 6 -14
M.H. 3 2 -1
R.K. 0 0 0
M.O 4 0 -4
Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-28
 Two-Sample Tests
Related Populations Example
Salesperson Number of Complaints Difference, Di
Before (1) After (2) (2-1)

C.B. 6 4 -2
T.F. 20 6 -14
M.H. 3 2 -1
R.K. 0 0 0
M.O 4 0 -4
n

 Di SD 
 (D i  D) 2

D i 1
 4.2 n 1
n  5.67
Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-29
 Two-Sample Tests
Related Populations Example
Has the training made a difference in the number of
complaints (at the α = 0.01 level)?

H0: μD = 0 Critical Value = ± 4.604

H1: μD  0 d.f. = n - 1 = 4

Test Statistic:

D  μ D  4.2  0
t   1.66
SD / n 5.67/ 5

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-30
 Two-Sample Tests
Related Populations Example

Reject Reject

/2 /2

- 4.604 4.604
- 1.66

Decision: Do not reject H0 Conclusion: There is no

(t statistic is not in the reject evidence of a significant change
region)
in the number of complaints

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-31
 Two-Sample Tests
Related Populations
 The confidence interval for μD (σ known) is:

σD
DZ
n
Where
n = the sample size (number of pairs in the paired sample)

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-32
 Two-Sample Tests
Related Populations
 The confidence interval for μD (σ unknown) is:

SD
D  t n1
n

 i
(D  D ) 2

where SD  i1
n 1

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-33
 Two Population Proportions
Goal: Test a hypothesis or form a confidence
interval for the difference between two
independent population proportions, π1 – π2

Assumptions:
n1π1  5 , n1(1-π1)  5
n2π2  5 , n2(1-π2)  5

The point estimate for the difference is p1 - p2

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-34
 Two Population Proportions

Since you begin by assuming the null

hypothesis is true, you assume π1 = π2 and pool
the two sample (p) estimates.

The pooled estimate for X1  X 2

p
the overall proportion is: n1  n 2

where X1 and X2 are the number of

successes in samples 1 and 2

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-35
 Two Population Proportions

The test statistic for p1 – p2 is a Z statistic:

Z 
 p1  p2     1   2 
1 1
p (1  p )   
 n1 n2 

X1  X 2 X X
where p , P1  1 , P2  2
n1  n 2 n1 n2

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-36
 Two Population Proportions

Hypothesis for Population Proportions

Lower-tail test: Upper-tail test: Two-tail test:

H0: π1  π2 H0: π1 ≤ π2 H0: π1 = π2

H1: π1 < π2 H1: π1 > π2 H1: π1 ≠ π2
i.e., i.e., i.e.,
H0: π1 – π2  0 H0: π1 – π2 ≤ 0 H0: π1 – π2 = 0
H1: π1 – π2 < 0 H1: π1 – π2 > 0 H1: π1 – π2 ≠ 0

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-37
 Two Population Proportions
Hypothesis for Population Proportions
Lower-tail test: Upper-tail test: Two-tail test:
H0: π1 – π2  0 H0: π1 – π2 ≤ 0 H0: π1 – π2 = 0
H1: π1 – π2 < 0 H1: π1 – π2 > 0 H1: π1 – π2 ≠ 0
  /2 /2

-z z -z/2 z/2

Reject H0 if Z < -Z Reject H0 if Z > Z Reject H0 if Z < -Z

 or Z > Z

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-38
 Two Independent Population
Proportions: Example
 Is there a significant difference between the
proportion of men and the proportion of
women who will vote Yes on Proposition A?

 In a random sample of 72 men, 36 indicated

they would vote Yes and, in a sample of 50
women, 31 indicated they would vote Yes

 Test at the .05 level of significance

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-39
 Two Independent Population
Proportions: Example
 H0: π1 – π2 = 0 (the two proportions are equal)
 H1: π1 – π2 ≠ 0 (there is a significant difference
between proportions)
 The sample proportions are:

 Men: p1 = 36/72 = .50

 Women: p2 = 31/50 = .62

 The pooled estimate for the overall proportion is:

X1  X 2 36  31 67
p    .549
n1  n 2 72  50 122

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-40
 Two Independent Population
Proportions: Example
Reject H0 Reject H0

The test statistic for π1 – π2 is:

.025 .025
z
 p1  p2     1   2 
1 1 
p (1  p)   
 n1 n 2  -1.96 1.96
 .50  .62   0 -1.31
   1.31
 1 1 
.549 (1  .549)   
 72 50 
Decision: Do not reject H0

Critical Values = ±1.96 Conclusion: There is no evidence of a

significant difference in proportions who
For  = .05 will vote yes between men and women.

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-41
 Two Independent Population
Proportions

The confidence interval for π1 – π2 is:

p1 (1  p1 ) p2 (1  p2 )
 p1  p2   Z 
n1 n2

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-42
 Testing Population Variances

 Purpose: To determine if two independent

populations have the same variability.

H0: σ12 = σ22 H0: σ12  σ22 H0: σ12 ≤ σ22

H1: σ12 ≠ σ22 H1: σ12 < σ22 H1: σ12 > σ22

Two-tail test Lower-tail test Upper-tail test

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-43
 Testing Population Variances

The F test statistic is:

2
S
F 1
2
S 2

S12 = Variance of Sample 1

n1 - 1 = numerator degrees of freedom
S 22 = Variance of Sample 2
n2 - 1 = denominator degrees of freedom

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-44
 Testing Population Variances

 The F critical value is found from the F table

 There are two appropriate degrees of
freedom: numerator and denominator.
 In the F table,
 numerator degrees of freedom determine the
column
 denominator degrees of freedom determine the
row

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-45
 Testing Population Variances
Lower-tail test Upper-tail test
H0: σ12  σ22 H0: σ12 ≤ σ22
H1: σ12 < σ22 H1: σ12 > σ22



0 0
Do not Do not Reject H0
Reject
H0 FL reject H0 reject H0 FU
Reject H0 if F < FL Reject H0 if F > FU

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-46
 Testing Population Variances

Two-tail test

H0: σ12 = σ22

H1: σ12 ≠ σ22
/2
/2 S12
F  2  FU
0
 rejection region S2
F for a two-tail test is:
Do not Reject H0
FL reject H0 FU S12
F  2  FL
S2

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-47
 Testing Population Variances

To find the critical F values:

1. Find FU from the F table for n1 – 1

numerator and n2 – 1 denominator degrees
of freedom.
1
FL 
2. Find FL using the formula: FU*

Where FU* is from the F table with n2 – 1

numerator and n1 – 1 denominator degrees of
freedom (i.e., switch the d.f. from FU)
Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-48
 Testing Population Variances
You are a financial analyst for a brokerage firm. You
want to compare dividend yields between stocks listed
on the NYSE & NASDAQ. You collect the following
data:
NYSE NASDAQ
Number 21 25
Mean 3.27 2.53
Std dev 1.30 1.16

Is there a difference in the variances between the

NYSE & NASDAQ at the  = 0.05 level?

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-49
 Testing Population Variances

 Form the hypothesis test:

 H0: σ21 – σ22 = 0 (there is no difference between variances)
 H1: σ21 – σ22 ≠ 0 (there is a difference between variances)
FU: FL:
 Numerator:  Numerator:
 n1 – 1 = 21 – 1 = 20 d.f.  n2 – 1 = 25 – 1 = 24 d.f.
 Denominator:  Denominator:
 n2 – 1 = 25 – 1 = 24 d.f.  n1 – 1 = 21 – 1 = 20 d.f.

FU = F.025, 20, 24 = 2.33 FL = 1/F.025, 24, 20 = 0.41

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-50
 Testing Population Variances
 The test statistic is:

S12 1.30 2
F 2  2
 1.256
S 2 1.16 /2 = .025 /2 = .025

0 F
Reject H0 Do not Reject H0
reject H0
FU=2.33
FL=0.41

 F = 1.256 is not in the  Conclusion: There is insufficient

rejection region, so we do evidence of a difference in variances
not reject H0 at  = .05
Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-51
 Chapter Summary
In this chapter, we have
 Compared two independent samples
 Performed Z test for the differences in two means
 Performed pooled variance t test for the differences
in two means
 Formed confidence intervals for the differences
between two means
 Compared two related samples (paired samples)
 Performed paired sample Z and t tests for the mean
difference
 Formed confidence intervals for the paired
difference
 Performed separate-variance t test

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-52
 Chapter Summary
In this chapter, we have
 Compared two population proportions
 Formed confidence intervals for the difference between
two population proportions
 Performed Z-test for two population proportions

 Performed F tests for the difference between two

population variances
 Used the F table to find F critical values

Statistics for Managers Using Microsoft Excel, 5e © 2008 Prentice-Hall, Inc. Chap 10-53