Chapter 11 Book Notes

Chapter 11 Book Notes - FinOp 250 Chapter 11 Book Notes...

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s we begin by believing that the presumption being made is TRUE. FinOp 250 Chapter 11 Book Notes CONCEPTS OF HYPOTHESIS TESTING Null Hypothesis (H 0 ) – A plausible hypothesis that may explain a given set of data Alternative Hypothesis (H 1 ) – A statement of what a statistical hypothesis test is set to establish H 0 : The defendant is innocent. H 1 : The defendant is guilty. When the testing procedure begins, it is always assumed that the null hypothesis is TRUE, with the goal of the process being to determine whether there is enough evidence to infer that the alternative hypothesis is TRUE. Two possible outcomes concerning the hypotheses: A. Reject the null hypothesis (defendant is convicted) B. Not reject the null hypothesis (defendant is acquitted of all charges) NOTE: NEVER say “Accept the null hypothesis” When testing hypotheses there are two types of errors: A. Type I Error ( ) – Occurs when we reject a TRUE null hypothesis α P(Type I Error) = α B. Type II Error ( ) – Occurs when we do not reject a FALSE null hypothesis
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This note was uploaded on 03/17/2009 for the course FINOPMGT 250 taught by Professor Kouzehkanani during the Spring '08 term at UMass (Amherst).

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Chapter 11 Book Notes - FinOp 250 Chapter 11 Book Notes...

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