321w8p1

# 321w8p1 - Rejecting the Null Once we have our hypotheses...

This preview shows pages 1–4. Sign up to view the full content.

Rejecting the Null Once we have our hypotheses formed, and our t-statistics and p-values calculated, we must decide whether or not our hypothesis is reasonable.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
Level of Significance – the probability level at which we feel comfortable rejecting the null. Typically denoted by . Critical Value – Given our chosen level of significance, the critical value is that value, above which, the probability of a t-stat occuring is equal to . The critical value is denoted by c. ex/ Suppose we choose = 5% as our level of significance. For a one sided test ( H 0 : j = 0, H 1 : j 0 ), the critical value is such that: P t j c 0.05 = P t j c With n-k-1=28 degrees of freedom, c=1.701
Rejection Rule for our One-Sided test: When t j >c, the probability of this t-stat occuring by chance is less than our chosen significance level 5%, so we reject the null hypothesis. When t j <c, the probability of the t-stat occuring by chance is greater than 5%, so do not reject the null hypothesis.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

## This note was uploaded on 01/26/2012 for the course ECON 401 taught by Professor Burbidge,john during the Fall '08 term at Waterloo.

### Page1 / 8

321w8p1 - Rejecting the Null Once we have our hypotheses...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online