Chapter-8
Estimation and Hypothesis testing
Introduction
o Statistical inference is the process of making interpretations or
conclusions from sample data for the entire population.
o It is the act of using data in a sample to make generalizations
about the population
o There are two ways of statistical inference.
1. Statistical estimation
2. Hypothesis testing
o Data analysis is the process of extracting relevant information
from the summarized data.
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Statistical estimation
o The computation of a statistic from sample data yields a value
that is an approximation of its target, an unknown true
population parameter value.
o This is one way of making inferences about the population
parameter where the investigator does not have any prior
notion about the values or characteristics of the population
parameter.
Method of estimation
1. Point estimate: It is a single value used to estimate the
population parameter.
For example, using the sample mean to estimate the population
mean.
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2. Interval estimation
A range of values (confidence interval) that used to estimate the
population parameter, with a specified level of confidence.
It provides a range of values within which the population
parameter is likely to lie, along with a specified level of
confidence.
It has the form: [lower limit, upper limit]
A point estimate is a single number
A confidence interval provides additional information on the
variability
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Definitions
Confidence interval: An interval estimate with a specific level
of confidence
Confidence level: The percent of the time the true value will lie
in the interval estimate given
Degrees of freedom: The number of data values that are
allowed to vary once a statistic has been determined
Estimator: A sample statistic that is used to estimate a
population parameter. It must be unbiased, consistent, and
relatively efficient
Estimate: Is the different possible values which an estimator
can assumes.
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Properties of good estimator
I. Unbiased: The mean of the estimates obtained from samples
of a given size is equal to the parameter being estimated.
II. Consistency: as sample size increases, the value of the
estimator approaches the value of the parameter estimated.
III. Relatively efficient: The estimator for a parameter with the
smallest variance.
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Interval estimation of the population mean
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90 0.10 0.05 1.645
95 0.05 0.025 1.96
99 0.01 0.005 2.58
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Hypothesis testing
This is also one way of making inference about population
parameter, where the investigator has prior notion about the
value of the parameter. It is the process of making inferences
about population parameters based on sample data.
Definitions:
Statistical hypothesis: is a claim or assumption about a
population parameter. It is the statement that is being tested in
hypothesis testing.
Test statistic: is a numerical value that is calculated from
sample data during a hypothesis test. It is used to determine
whether the null hypothesis should be rejected or not.
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There are two types of hypothesis:
Null hypothesis:
It is the hypothesis of equality or the hypothesis of no
difference.
Usually denoted by H0.
Alternative hypothesis:
It is the hypothesis available when the null hypothesis has to
be rejected.
It is the hypothesis of difference.
Usually denoted by H1 or Ha.
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Types and size of errors
Testing hypothesis is based on sample data which may involve
sampling and non sampling errors.
The following table gives a summary of possible results of any
hypothesis test:
Decision
Reject H0 Don't reject H0
Truth H0 Type I Error Right Decision
H1 Right Type II Error
Decision
Type I error: Rejecting the null hypothesis when it is true.
Type II error: Failing to reject the null hypothesis when it is
false.
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General steps in hypothesis testing:
The first step in hypothesis testing is to specify the null
hypothesis (H0) and the alternative hypothesis (H1).
Choose the significance level
Identify appropriate test statistic
Determine the critical value or P- value
Making decision
Draw conclusion
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Hypothesis testing about the population mean
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H0 Reject H0 if Accept H0 if
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H0 Reject H0 if Accept H0 if
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Activity
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Reading assignment
Interval estimation for population proportion
Statistical test concerning population proportion
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