econometrics (Page 352)

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may reject it. In the language of statistics, the stated hypothesis is known as the null hypothesisand is denoted by the symbol H0. The null hypothesis is usually tested against an alternative hypothesis(also known as maintained hypothesis) denoted by H1, which may state, for example, that true β2 is different from unity. The alternative hypothesis may be simpleorcomposite. 6 For example, H1:β2=1.5is a simple hypothesis, but H1:β2=1.5is a composite hypothesis. The theory of hypothesis testing is concerned with developing rules or procedures for deciding whether to reject or not reject the null hypothesis. There are two mutually complementaryapproaches for devising such rules, namely, confidence interval and test of significance. Both these approaches predicate that the variable
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