{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Econ 281 - Chapter 5 Hypothesis Testing

Econ 281 - Chapter 5 Hypothesis Testing - Chapter 5...

Info icon This preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Chapter 5: Hypothesis Testing Introduction to Econometrics Econ 281 Spring Quarter 2007
Image of page 1

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

View Full Document Right Arrow Icon
2 Hypothesis testing in the simple linear Regression Model Let’s assume we ran a regression of Test Scores on the Student Teacher Ratio and obtained the following results Can we be sure that the true (population) parameter is not zero? We use hypothesis testing to obtain an answer to this question STR TestScore - = 28 . 2 9 . 698 1 β
Image of page 2
3 Hypothesis Testing The first thing to do in Hypothesis Testing is to formulate TWO MUTUALLY EXCLUSIVE hypotheses The Null Hypothesis The hypothesis we are interested in – Denoted by H 0 The Alternative Hypothesis – The hypothesis if H 0 is not true – Denoted by H A
Image of page 3

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

View Full Document Right Arrow Icon
4 Hypothesis Testing Let’s start with a simple example and test the hypothesis that a population mean is equal to a specific number In this case our H 0 would be 0 : 0 H X H μ μ = Value of population mean under Null Hypothesis
Image of page 4
5 Hypothesis Testing Our alternative Hypothesis can take two forms One-Sided Two-Sided Two-Sided alternative hypothesis One side alternative hypothesis 0 : H X A H μ μ 0 : H X A H μ μ
Image of page 5

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

View Full Document Right Arrow Icon
6 Hypothesis Testing Now we take a random sample and calculate the value of the sample mean Most likely it will differ from the value specified in H 0 . Why? Two reasons The Null Hypothesis is false Random Sampling We CANNOT distinguish between the two with certainty
Image of page 6
7 Hypothesis Testing What can we do? We can ask “What is the probability of observing this particular value of the sample mean if the Null Hypothesis is in fact true?” We call this the p-value or significance probability Let’s look at an example
Image of page 7

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

View Full Document Right Arrow Icon
8 Hypothesis Testing: Example Assume the Bulls finish the season 50-32 This implies the true population mean is 0.61 Assume we take a sample of 30 games and calculate a sample mean of .55 We formulate a Null Hypothesis that the true mean is actually 0.2 Our one-sided alternative hypothesis is that the true mean is greater We get a p-value of less than 1 percent!! This makes it very unlikely that the H 0 is true!!!
Image of page 8
9 Hypothesis Testing Question: How are p-values calculated?
Image of page 9

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

View Full Document Right Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the 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