Necessary Conditions for Statistical Decision Making-ECO6416

Necessary Conditions for Statistical Decision...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Necessary Conditions for Statistical Decision Making Introduction to Inferential Data Analysis Necessary Conditions: Do not just learn formulas and number-crunching. Learn about the conditions under which statistical testing procedures apply. The following conditions are common to almost all statistical tests: 1. Any undetected outliers may have major impact and may influence the results of almost all statistical estimation and testing procedures. 2. Homogeneous population. That is, there is not more than one mode. Perform Test for Homogeneity of a Population 3. The sample must be random. Perform Test for Randomness . 4. In addition to the Homogeneity requirement, each population has a normal distribution. Perform the Lilliefors' Test for Normality . 5. Homogeneity of variances. Variation in each population is almost the same as in the other(s). Perform The Bartlett's Test . For two populations use the F-test. For 3 or more populations, there is a practical rule known as the"Rule of 2". In this rule, one divides the highest variance of a sample by the
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: lowest variance of the other sample. Given that the sample sizes are almost the same, and the value of this division is less than 2, then the variations of the populations are almost the same. Notice: This important condition in analysis of variance (ANOVA and the t-test for mean differences) is commonly tested by the Levene test or its modified test known as the Brown-Forsythe test. Interestingly, both tests rely on the homogeneity of variances condition! These conditions are crucial, not for the method of computation, but for the testing using the resultant statistic. Otherwise, we can do ANOVA and regression without any assumptions, and the numbers come out the same. Simple computations give us least-square fits, partitions of variance, regression coefficients, and so on. We do need the above conditions when test of hypotheses are our main concern....
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern