Question

Explain the procedures of testing of hypothesis

Answer 1

The following are the steps involved in hypothesis testing problems:

1. Null hypothesis: Set up the null hypothesis H₀

2. Alternative hypothesis: Set up the alternative hypothesis.

This will enable us to decide whether we have to use two-tailed test or single-tailed test (right or left tailed)

3. Level of significance: Choose the appropriate level of significant (a) depending on the reliability of the estimates and permissible risk.

This is to be fixed before sample is drawn, i.e., a is fixed in advance.

4. Test statistic: Compute the test statistic

Z = `("t" - "E"("t"))/sqrt("var"("t"))`

= `("t" - "E"("t"))/("S"."E"("t"))` N(0, 1) as n → `oo`

5. Conclusion: We compare the computed value of Z in step 4 with the significant value or critical value or table value Zα at the given level of significance.

(i) If |Z | < Zα i.e., if the calculated value of is less than critical value we say it is not significant.

This may due to fluctuations of sampling and sample data do not provide us sufficient evidence against the null hypothesis which may therefore be accepted.

(ii) If |Z |> Zα i.e., if the calculated value of Z is greater than critical value Zα then we say it is significant and the null hypothesis is rejected at level of significance α.