HYPOTHESIS FORMATION,

TYPES OF ERROR AND

ESTIMATION
 WHAT IS A HYPOTHESIS?

• A proposition, tentative assumption, or

educated conjecture about some aspect of
the world around us that is testable.

• Usually derived from theoretical framework

in quantitative approach
 WHY USE HYPOTHESES?

• If research were limited to gathering

facts, knowledge would hardly
advance. We need to determine what is
relevant and what is not.

• Hypothesis testing distinguishes

scientific reasoning from everyday
speculation and old wives’ tales
 HYPOTHESIS TESTING

• Hypothesis Testing. An inferential

procedure that uses sample data to
evaluate the validity of a hypothesis about
a population.
• That is: hypotheses relate to populations
but we usually test them with samples.
 SEQUENCE IN HYPOTHESIS
TESTING
Scientific thinking possesses three
essential steps:
1. The proposal of a hypothesis to
account for a phenomenon.
2. The deduction from the hypothesis
that certain phenomena should be
observed in given circumstances.
3. The checking of this deduction by
observation and testing.
 STATING THE HYPOTHESIS
• Hypotheses may be stated in the form of
proposed relationships (associations) or
in terms of differences (comparisons).
• A relationship hypothesis would exist if we
propose ‘that changes in demand for a
specified good are related to changes in
price of the same good’.
• A difference hypothesis is ‘that female
employees take more sick days than male
employees’.
 STATISTICAL TESTS
ASSOCIATED WITH THE TWO
TYPES OF HYPOTHESES

• Relationship hypotheses use

statistical tests of correlation or
association, and regression when
prediction is involved.

• Difference hypotheses use statistical

tests of differences.
 CRITERIA FOR JUDGING
HYPOTHESES

• Hypotheses should be clear and precise

• Hypotheses should be testable with
operationalized variables
• Hypotheses should state expected
relationships between variables explicitly
• Hypotheses should be limited in scope
• Hypotheses should be grounded in past
knowledge or reasonably consistent with
known facts
 LOGIC OF HYPOTHESIS
TESTING
• We set up two competing statements or
hypotheses, the null hypothesis and the
alternate hypothesis. These hypotheses
are mutually exclusive and exhaustive.
• How do we test or compare these
competing hypotheses? This is the
counterintuitive part. We try to disprove
the Null Hypothesis.
 THE NULL AND ALTERNATIVE HYPOTHESES

• The Null Hypothesis – symbolized as Ho

– Ho: The finding was simply a chance (random)
occurrence – nothing really occurred
• The Alternate Hypothesis – symbolized as H1
– H1: The finding did not occur by chance but is
real (alternative version) – something did occur
• The null hypothesis is assumed to be true
unless we find evidence to the contrary which
then allows us to assume the alternate
hypothesis is more likely correct.
 MAKING THE JUDGEMENT CALL
• On what basis can we decide between the
two competing hypotheses?

• In ‘traditional statistics’ something occurring

with a probability equal to or less than .05 (=
5% = 1 chance in 20) is conventionally
considered the border line for ‘unlikely’ to be
chance. The significance level is the risk of
rejecting a null hypothesis when the latter is
correct.
 NULL HYPOTHESIS TESTING

• The phrase ‘No Significant Difference (or

Relationship’) in the Ho statement does not
imply that there is no relationship or no
difference, i.e. it does not mean absolute
equality.
• It implies that any differences or relationships
are within the range of chance or sampling
error bounded by a set significance level and
do not reach that stated significance level.
 WHAT DOES THE NULL HYPOTHESIS
IMPLY?
• It states the difference or relation is such that it
would regularly occur by chance as one of the many
sampling differences or relationships that occur
around the population mean.
• As chance sampling differences, they are not due to
anything you did. Remember, approximately 95% of
all random sample means are found between +/-
1.96Z, while 68.32% are located between +/-1Z.
• The null hypothesis is saying the difference or
relationship you found is one of these chance ones:
the difference/relationship is not statistically
significant.
 SIGNIFICANCE LEVELS
• The words ‘no statistically significant
difference/relationship’ in the Ho
statement gives us a baseline to
determine whether there has been any
further effect beyond the chance level.

• We can thus set precise limits - our

significance levels - for the rejection of a
null hypothesis. This is the basic principle
on which most statistical tests are based.
 STATISTICALLY SIGNIFICANT
DIFFERENCES
• Statistically significant results occur rarely and
should be equal to or less than the 5% level ( p
≤< .05). i.e. occur beyond the significance level
cut-offs (outside the 95% confidence limits).

• Strongly significant results may reach the 1% level

(p ≤< .01 or 1 in 100 by chance ) or even the .01%
level (p ≤< .001 or 1 in 1000 by chance). Any
significance less than .001 is quoted in SPSS
results as .000
 SIGNIFICANCE LEVEL (ALPHA
LEVEL)
• The significance level is often termed the alpha
α level.
• The significance level offers a probability level
for our evidence to be unreasonable as a
chance result.
• A minimum decision criterion of p ≤< 0.05 (5%
level for two-tailed tests) is recommended.
• BUT a chance result at this level will occur 5% of
the times.
 Null Hypothesis Retention and Rejection
Areas 5% level
Significance or alpha level cut off for 5%.
Probability of chance occurrence within
this area is 95%. Null hypothesis zone

Test statistic
Test statistic in here, reject
in here, reject null
null hypothesis.
hypothesis. Only 2.5% or
Only 2.5% or less values
less values here
here

Retain null hypothesis zone

Z -3 -1.96 -1 0 +1 +1.96 +3
Sampling Distribution
 HYPOTHESIS TESTING SEQUENCE
1. Set up a testable hypothesis in its null and
alternate forms.
2. Set a level of significance and conduct the
study.
3. If the probability p does not reach the set level
of significance (i.e. if p > α), assume that the
treatment did not work, that there is no real
group difference or relationship.
4. Then we retain Ho and consequently cannot
accept the alternate hypothesis (H1).
5. Alternatively, if we achieve or go beyond the
level of significance previously set (i.e. if p ≤ α)
then we can reject Ho and accept H1.
 PROBABILITY AND “PROOF"
• Statistics can never ‘prove’ anything
• Statistical tests only assign a probability value to
the results you have, indicating the likelihood (or
probability) that they come from random
fluctuations in sampling. We are looking for a
low probability value that they are random, i.e.
p>≤.05 in order to claim significance.
• Never ever talk about ‘proving’ a hypothesis
– If we achieve significance we have simply
found support for it at a particular level of
probability.
 PROBABILITY AND PROOF
• Because we are using probability levels (levels of
significance) we can never prove a hypothesis as
even at these levels a result may occur by chance
occasionally.

• These chances are 1 in 20 for p > .05, 1 in 100 for p

> .01, and 1 in 1000 for p > .001. So if we employ
the 1% significance level (p > .01), for example, a
difference will actually occur at this level 1 in 100
occasions over the long run simply by chance.

• If our result is at or beyond that level, we are hoping

and assuming that it is not the one in a hundred
result. But we can never know, it may be!!
PROBABILITY AND PROOF
If our observations would be very unlikely
to occur if the null hypothesis were true, it
follows that the null hypothesis is probably
false, and consequently the alternate
hypothesis is probably true.

Notice the nagging use of the word

‘probably’. Unfortunately, that is as far as
hypothesis testing can take us.
SELECTING A SIGNIFICANCE LEVEL
• The researcher has complete control over
selecting the value of this significance level.
• While we recommend a minimum decision
criterion of p ≤< 0.05 (5% level for two-tailed
tests), you should be cautious about the
blind adoption of this level.
• There are research contexts (pharmaceutical
research) in which one would want to be more
conservative. In these cases, the significance
level might be lowered to 0.001 (0.01%) where
more extreme values of a statistic would be
required before non-chance factors were
suspected.
 REFERRING TO STATISTICAL SIGNIFICANCE

Reports refer to the significance level of a

finding in many ways. All of the following
are equivalent:
- The finding is significant at the .05 level
- The confidence level is 95 percent
- The type I error rate is .05
- The alpha level is .05
  = .05
- There is a 95 percent certainty that the
result is not due to chance
- There is a 1 in 20 chance of obtaining this
result by chance
- The area of the region of rejection is .05
- The p–value is .05
- p = .05
POSSIBILITY OF ERRONEOUS DECISION
• The aim of statistical testing is to correctly reject
a false Ho and correctly retain a true Ho.
• Since there is some level of error in every study,
the possibility that our results are erroneous is
directly related to our acceptable level of error.
• If we set alpha at 0.05 we are saying that we will
accept 5% error, which means that if the study
were to be conducted 100 times, we would
accept as significant results that were chance
ones in 5 studies on average.
• How do we then know that our study doesn’t fall
in the 5% error category? We don’t!
 PROBABILITY IN SPSS OUTPUT
• Examine SPSS tabular output usually under column
headings such as ‘Sig.’ or ‘Two-tailed Sig’, or ‘Prob.’ for
the probability (or ‘p-value’) of your results.

• This is the probability you quote as being the ‘level of

significance’ associated with your results.

• Normally this p-value should be less than or equal to

0.05 to make the claim of ‘significant’ in your discussion.

• Treat the p-value as a measure of the confidence or faith

you have in your results being real (and not being due to
chance fluctuations in sampling). But remember that by
chance a result at the 5% level will occur 5% of the
times.
 DIRECTIONS AND TAILS
• Hypotheses can be stated in a NON-
DIRECTIONAL or DIRECTIONAL form
• Non-directional hypotheses
– states that one group differs from another on
some characteristic, i.e., it does NOT specify
the DIRECTION of the difference
– Example:
• H0 – ‘that there is no statistically significant
difference between the number of mistakes made
by male and female bank tellers’
• H1 – ‘that there is a statistically significant
difference between the number of mistakes made
by male and female bank tellers’
 DIRECTIONS AND TAILS
• Non-directional hypotheses use two-tailed tests.
– Do not specify the direction of difference.
– Tail refers to the ends of the normal distribution.
• Thus the regions of rejection lie in both tails of
the normal distribution
• Assuming an alpha level (significance level)
of .05:
– the rejection region to the right is marked by the
critical value of +1.96 and contains .025 of the cases
– that to the left is at -1.96 and also contains .025 of
cases
 DIRECTIONS AND TAILS
• Directional hypotheses
– specifies the DIRECTION of the difference or
deviation from the null value, i.e., that one
group is higher, or lower, than another group
on some attribute
– Example:
• H0 - ‘that female bank tellers do not make
significantly fewer mistakes than male bank tellers’
• H1 - ‘that female bank tellers make fewer mistakes
than male bank tellers’
 DIRECTIONS AND TAILS
• Directional hypotheses use one-tailed tests.
– Assuming an alpha level of .05: the region of
rejection is fixed entirely in the predicted tail of the
distribution
– that tail alone must now contain .05 of the cases
– the critical value now drops to a z-score of +1.65
• The probability remains the same (.05), but
because it lies only in one tail of the distribution,
the cut-off is a smaller critical value: 1.65 < 1.96.
• one-tailed tests offer a better chance to reject
your null hypothesis
 Testing the null hypothesis with a two-tailed
test
Significance (alpha) level cut offs for 5%.
Probability of chance occurrence within
this area is 95%. Null hypothesis zone.
ACCEPT NULL HYPOTHESIS

Test statistic in
Test statistic in here, reject null
here, reject null hypothesis
hypothesis

+1.81Z
here

-1.96Z 0 +1.96Z
2.5% of values 2.5% of values
below -1.96Z Sampling Distribution above +1.96Z
Testing the null hypothesis with a one-tailed
test

1.81Z here. Value

exceeds 5%
significance level.
Reject null hypothesis
95% of values in this area
Retain Null Hypothesis
1% of values
above 2.33Z

-2Z -1Z 0Z + 1Z

Sampling Distribution 5% of values above

+1.65Z
 Directional Tests
Directional tests should be used with caution
because
1. they may allow the rejection of H0 when
the experimental evidence is weak, or
2. they may predict in the wrong tail! This
has consequences, of not only non-
significant findings, but acute
embarrassment!
 THE CRITICAL REGION
• The Critical Region. The area of extreme
sample values that are very unlikely to be
obtained if the null hypothesis is true.
• The size of the critical region for rejection is
determined both by the significance level (alpha
level) chosen and whether we have a directional
or non-directional hypothesis. Sample data that
fall in the critical region will warrant rejection of
the null hypothesis.
 STATISTICAL ERRORS
- TYPE I AND TYPE II
Type I and Type II Errors
Type I error:
• You might say things are significantly
different when they are not, i.e. rejecting
the null when it is true. The probability of
this is equal to the alpha or significance level.
– Type II error:
• You may say that things are not
significantly different when they are and
miss a significant relationship that really
exists, i.e. accepting the null when it is false
 BALANCING ERROR TYPES
In choosing levels of significance and one-or
two-tailed tests we are always balancing two
possible errors:

a) set the significance level too high low e.g.

α = .04 and/or state a two-tailed hypothesis (in
both cases, it’s more difficult to reject Ho) and
you maximize a Type II error;

b) set the significance level too low high e.g.

α = .06 and/or invoke a one-tailed hypothesis (in
both cases, it’s easier to reject Ho) and you will
maximize a Type I error.
 BALANCING ERROR TYPES
• Type I errors are determined by the alpha
level and are therefore under the
investigator’s control.
• Lowering the amount of acceptable error
(significance level) from 5% to 1% would
reduce the chances of a Type I error.
• Lowering the acceptable error to 1%,
however, increases chances of a Type II
error, which is the retention of H0 when it
should be rejected.
• So, the greater the chances of a Type I error,
the less likely a Type II error, and vice versa.
 POINT AND CONFIDENCE
INTERVAL (CI) ESTIMATION
• Point Estimates
– a single sample statistic that is used to
estimate the true population parameter.
• Interval Estimates
– A range of values often called a confidence
interval (CI) bounded by a specific level of
confidence. SPSS provides the 95% CI in its
Descriptives menu.
 CONFIDENCE LEVELS AND
INTERVALS
• Confidence Interval. The range within
which we believe the true population
estimate to lie

• Confidence Level. The probability that

the population parameter falls within the
confidence interval
CONFIDENCE LEVELS AND INTERVALS
• levels of significance may also be termed
confidence levels as we may be confident that a
particular value falls within their boundary
• For example, the 95% confidence interval (CI)
contains values that have a 95% or 0.95
probability, or 95 in 100, or 19 in 20 chances of
occurring there. Remember SPSS provides this
95% CI under Descriptives
• That is, a CI is a range within which a certain
value like a mean will fall at a certain level of
probability. It is the converse of the Critical
Region which is the area outside the CI range
 EXAMPLE OF CI
If we want a 95% confidence interval,
then we want 95% (.95) around the mean
– which leaves 2.5% (.025) at each tail.

CI
Critical area

Critical
area
 EXAMPLE OF POINT AND CI
ESTIMATION
• 435 Internet users are asked to supply details about the
length of time they have had wireless connections

• the mean length of time wireless Internet has been installed

is 5 years, the point estimate, and the standard deviation is
one year (52 weeks)

• standard error of the mean will be:

SEm = 52 = 52 = 2.5 weeks
435 20.8

• With a 95% Confidence Interval we can assume that mean

falls within 1.96 SEm, i.e. 5 years ± 5 weeks approx.
 ESTIMATING A PROPORTION
• Sampling in the business world is often concerned
with the proportion or percentage of a given
population possessing particular characteristics,
preferences, or opinions, e.g. what proportion of the
20-30 yr age group drink coffee rather than tea. The
standard error of the sample proportion is
• SEp =  pq
N
• The sample proportion gives a point estimate of the
population proportion. To obtain the 95%
confidence interval we calculate that the population
proportion that likely lies between +1.96 SEp and -
1.96 SEp .