A PowerPoint Presentation Package to Accompany

Applied Statistics in Business &

Economics, 5th edition

David P. Doane and Lori E. Seward

Prepared by Lloyd R. Jaisingh

McGraw-Hill/Irwin Copyright © 2015 by The McGraw-Hill Companies, Inc. All rights reserved.
 Chapter 10
Two-Sample Hypothesis Tests

Chapter Contents

10.1 Two-Sample Tests

10.2 Comparing Two Means: Independent Samples
10.3 Confidence Interval for the Difference of Two Means, 1 - 2
10.4 Comparing Two Means: Paired Samples
10.5 Comparing Two Proportions
10.6 Confidence Interval for the Difference of Two Proportions, 1 - 2
10.7 Comparing Two Variances

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 Chapter 10
Two-Sample Hypothesis Tests

Chapter Learning Objectives (LO’s)

LO10-1: Recognize and perform a test for two means.

LO10-2: Explain the assumptions underlying the two-sample
test of means.
LO10-3: Construct a confidence interval for .
LO10-4: Recognize paired data and be able to perform a
paired t test.
LO10-5: Perform a test to compare two proportions using z.

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 Chapter 10
Two-Sample Hypothesis Tests

Chapter Learning Objectives (LO’s)

LO10-6: Check whether normality may be assumed for two

proportions.
LO10-7: Construct a confidence interval for π1− π2
LO10-8: Carry out a test of two variances using the
F distribution.

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 Chapter 10
10.1 Two-Sample Tests

What is a Two-Sample Test

• A Two-sample test compares two sample estimates with each
other.
• A one-sample test compares a sample estimate to a non-sample
benchmark.

Basis of Two-Sample Tests

• Two-sample tests are especially useful because they possess a
built-in point of comparison.
• The logic of two-sample tests is based on the fact that two
samples drawn from the same population may yield different
estimates of a parameter due to chance.

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 Chapter 10
10.1 Two-Sample Tests

What is a Two-Sample Test

• If the two sample statistics differ by more than the amount
attributable to chance, then we conclude that the samples came
from populations with different parameter values.

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 Chapter 10
10.1 Two-Sample Tests

Test Procedure

• State the hypotheses

• Set up the decision rule
• Insert the sample statistics
• Make a decision based on the critical values or using p-
values

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 Chapter 10
LO10-1 10.2 Comparing Two Means:
Independent Samples
LO10-1: Recognize and perform a test for two means.

Format of Hypotheses

• The hypotheses for comparing two independent

population means µ1 and µ2 are:

Note: is the difference in the means.

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 Chapter 10
LO10-2 10.2 Comparing Two Means:
Independent Samples
LO10-2: Explain the assumptions underlying the
two-sample test of means.
Case 1: Known Variances
• When the variances are known, use the normal distribution for the
test (assuming a normal population). The test statistic is:

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 Chapter 10
LO10-2 10.2 Comparing Two Means:
Independent Samples
Case 2: Unknown Variances, Assumed Equal
• Since the variances are unknown, they must be estimated
and the Student’s t distribution is used to test the means.
• Assuming the population variances are equal, s12 and s22
can be used to estimate a common pooled variance sp2.

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 Chapter 10
LO10-2 10.2 Comparing Two Means:
Independent Samples
Case 3: Unknown Variances, Assumed Unequal

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 Chapter 10
LO10-2 10.2 Comparing Two Means:
Independent Samples
Case 3: Unknown Variances, Assumed Unequal
• Welch-Satterthwaite test

• A conservative Quick Rule for degrees of freedom is to

use min(n1 – 1, n2 – 1).
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 Chapter 10
10.2 Comparing Two Means:
Independent Samples
Summary for the Test Statistic
• For the common situation of testing for a zero difference () in two
population means the possible pairs of null and alternative
hypotheses are

• If the population variances 12 and 22 are known, then use
the normal distribution.
• If population variances are unknown and estimated using
s12 and s22, then use the Students t distribution
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 Chapter 10
10.2 Comparing Two Means:
Independent Samples

Summary for the Test Statistic

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 Chapter 10
10.2 Comparing Two Means:
Independent Samples
Steps in Testing Two Means (See text for examples)
• Step 1: State the hypotheses
• Step 2: Specify the decision rule
Choose  (the level of significance) and determine the critical
value(s).
• Step 3: Calculate the Test Statistic
• Step 4: Make the decision Reject H0 if the test statistic falls in the
rejection region(s) as defined by the critical value(s).
• Step 5: Take action based on the decision.

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 Chapter 10
10.2 Comparing Two Means:
Independent Samples

Which Assumption Is Best?

• If the sample sizes are equal, the Case 2 and Case 3 test statistics
will be identical, although the degrees of freedom may differ.
• If the variances are similar, the two tests will usually agree.
• If no information about the population variances is available, then
the best choice is Case 3.
• The fewer assumptions, the better.

Must Sample Sizes Be Equal?

• Unequal sample sizes are common and the formulas still apply.

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 Chapter 10
10.2 Comparing Two Means:
Independent Samples
Large Samples
• For unknown variances, if both samples are large (n1  30 and
n2  30) and the population is not badly skewed, use the following
formula with appendix C.

Caution: Three Issues

1. Are the populations skewed? Are there outliers?

Check using histograms and/or dot plots of each sample.

t tests are OK if moderately skewed, especially if samples
are large. Outliers are more serious.

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 Chapter 10
10.2 Comparing Two Means:
Independent Samples
Caution: Three Issues
2. Are the sample sizes large (n  30)?
If samples are small, the mean is not a reliable indicator of central
tendency and the test may lack power.
3. Is the difference important as well as significant?
A small difference in means or proportions could be significant if
the sample size is large.

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 Chapter 10
LO10-3 10.3 Confidence Interval for the
Difference of Two Means 1 - 2
LO10-3: Construct a confidence interval for 1 − 2

Confidence Intervals for the Difference of Two Means

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 Chapter 10
LO10-3 10.3 Confidence Interval for the
Difference of Two Means 1 - 2
LO10-3: Construct a confidence interval for 1 − 2

Confidence Intervals for the Difference of Two Means

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 Chapter 10
LO10-3 10.3 Confidence Interval for the
Difference of Two Means 1 - 2

LO10-3: Construct a confidence interval for 1 − 2

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 Chapter 10
LO10-3 10.3 Confidence Interval for the
Difference of Two Means 1 - 2
LO10-3: Construct a confidence interval for 1 − 2

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 Chapter 10
LO10-4 10.4 Comparing Two Means:
Paired Samples
LO10-4: Recognize paired data and be able to perform a
paired t test.
Paired Data
• Data occurs in matched pairs when the same item is
observed twice but under different circumstances.
• For example, blood pressure is taken before and after
a treatment is given.
• Paired data are typically displayed in columns.

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 Chapter 10
LO10-4 10.4 Comparing Two Means:
Paired Samples
Paired t Test
• Paired data typically come from a before/after
experiment.
• In the paired t test, the difference between x1 and x2 is
measured as d = x1 – x2
• The mean and standard deviation for the differences d
are given below.

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 Chapter 10
LO10-4 10.4 Comparing Two Means:
Paired Samples
Paired t Test
• The test statistic is just for a one-sample t-test.

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 Chapter 10
LO10-4 10.4 Comparing Two Means:
Paired Samples
Steps in Testing Paired Data

• Step 1: State the hypotheses, for example

H0: µd = 0
H1: µd ≠ 0
• Step 2: Specify the decision rule.
Choose  (the level of significance) and
determine the critical
values from Appendix D or with use of technology.
• Step 3: Calculate the test statistic t
• Step 4: Make the decision
Reject H0 if the test statistic falls in the rejection region(s) as
defined by the critical values

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 Chapter 10
LO10-4 10.4 Comparing Two Means:
Paired Samples
Analogy to Confidence Interval

• A two-tailed test for a zero difference is equivalent to

asking whether the confidence interval for the true
mean difference µd includes zero.

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 Chapter 10
LO10-5 10.5 Comparing Two Proportions

LO10-5: Perform a test to compare two proportions using z.

Testing for Zero Difference: 1 - 2 = 0

• To compare two population proportions, 1, 2, use the

following hypotheses.

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 Chapter 10
LO10-5 10.5 Comparing Two Proportions

Testing for Zero Difference: 1 - 2 = 0

Sample Proportions

• The sample proportion p1 is a point estimate

of 1 and p2 is a point estimate of 2:

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 Chapter 10
LO10-5 10.5 Comparing Two Proportions

Testing for Zero Difference: 1 - 2 = 0

Pooled Proportion
• If H0 is true, there is no difference between
1 and 2, so the samples are pooled (or averaged) in
order to estimate the common population proportion.

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 Chapter 10
LO10-5 10.5 Comparing Two Proportions

Testing for Zero Difference: 1 - 2 = 0

Test Statistic

• If the samples are large, p1 – p2 may be assumed normally

distributed.
• The test statistic is the difference of the sample proportions divided
by the standard error of the difference.
• The standard error is calculated by using the pooled proportion.
• The test statistic for the hypothesis 1 - 2 = 0 is:

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 Chapter 10
LO10-5 10.5 Comparing Two Proportions

Testing for Zero Difference: 1 - 2 = 0

Test Statistic

• If the samples are large, p1 – p2 may be assumed normally

distributed.
• The test statistic is the difference of the sample proportions divided
by the standard error of the difference.
• The standard error is calculated by using the pooled proportion.
• The test statistic for the hypothesis 1 - 2 = 0 is:

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 Chapter 10
LO10-5 10.5 Comparing Two Proportions

Testing for Zero Difference: 1 - 2 = 0

Steps in Testing Two Proportions

• Step 1: State the hypotheses

• Step 2: Specify the decision rule
Choose  (the level of significance) and determine the critical
value(s).
• Step 3: Calculate the Test Statistic. Assuming that 1 = 2, use a
pooled estimate of the common proportion.
• Step 4: Make the decision Reject H0 if the test statistic falls in the
rejection region(s) as defined by the critical value(s).

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 Chapter 10
LO10-6 10.5 Comparing Two Proportions
LO10-6: Check whether normality may be assumed for two
proportions.
Testing for Zero Difference: 1 - 2 = 0
Checking for Normality
• We have assumed a normal distribution for the statistic p1 – p2.
• This assumption can be checked.
• For a test of two proportions, the criterion for normality is n  10
and n(1 − )  10 for each sample, using each sample proportion in
place of .
• If either sample proportion is not normal, their difference cannot
safely be assumed normal.
• The sample size rule of thumb is equivalent to requiring that each
sample contains at least 10 “successes” and at least 10 “failures.”
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 Chapter 10
10.5 Comparing Two Proportions

Testing for Non-Zero Difference

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 Chapter 10
LO10-7 10.6 Confidence Interval for the
Difference of Two Proportions 1 - 2
LO10-7: Construct a confidence interval for 1 - 2.

• If the confidence interval does not include 0, then we

will reject the null hypothesis of no difference in the
proportions.

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 Chapter 10
LO10-8 10.7 Comparing Two Variances
LO10-8: Carry out a test of two variances using the
F distribution
Format of Hypotheses
• To test whether two population means are equal, we may also
need to test whether two population variances are equal.

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 Chapter 10
LO10-8 10.7 Comparing Two Variances
The F Test
• The test statistic is the ratio of the sample variances:

• If the variances are equal, this ratio should be near

unity: F = 1

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 Chapter 10
LO10-8 10.7 Comparing Two Variances

The F Test

• If the test statistic is far below 1 or above 1, we would

reject the hypothesis of equal population variances.
• The numerator s12 has degrees of freedom df1 = n1 – 1
and the denominator s22 has degrees of freedom df2
= n2 – 1.
• The F distribution is skewed with the mean > 1 and
its mode < 1.

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 Chapter 10
LO10-8 10.7 Comparing Two Variances
The F Test: Critical Values

• Critical values for the F test are denoted

FL (left tail) and FR (right tail).
• A right-tail critical value FR may be found from
Appendix F using df1 and df2 degrees of freedom.
FR = Fdf1, df2
• A left-tail critical value FR may be found by reversing
the numerator and denominator degrees of freedom,
finding the critical value from Appendix F and taking its
reciprocal: FL = 1/Fdf2, df1

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 Chapter 10
LO10-8 10.7 Comparing Two Variances
The F Test: Critical Values

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 Chapter 10
LO10-8 10.7 Comparing Two Variances
Comparison of Variances: Two Tailed Test

• Step 1: State the hypotheses, for example

H0: 12 = 22
H1: 12 ≠ 22
• Step 2: Specify the decision rule
Degrees of freedom are:
Numerator: df1 = n1 – 1
Denominator: df2 = n2 – 1
Choose a and find the left-tail and right-tail critical
values from Appendix F.

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 Chapter 10
LO10-8 10.7 Comparing Two Variances
Comparison of Variances: Two Tailed Test

• Step 3: Calculate the test statistic Fcalc = s12/s22.

• Step 4: Make the decision
Reject H0 if the test statistic falls in the rejection
regions as defined by the critical values FL and FU.

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 Chapter 10
LO10-8 10.7 Comparing Two Variances

Comparison of Variances: One Tailed Test

• Step 1: State the hypotheses, for example
H0: 12 = 22
H1: 12 < 22
• Step 2: State the decision rule
Degrees of freedom are:
Numerator: df1 = n1 – 1
Denominator: df2 = n2 – 1
Choose a and find the left-tail critical value from
Appendix F.

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 Chapter 10
LO10-8 10.7 Comparing Two Variances
Comparison of Variances: One Tailed Test

• Step 3: Calculate the Test Statistic Fcalc = s12/s22.

• Step 4: Make the decision
Reject H0 if the test statistic falls in the left-tail rejection
region as defined by the critical value.

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 Chapter 10
LO10-8 10.7 Comparing Two Variances
Folded F Test
• We can make the two-tailed test for equal variances
into a right-tailed test, so it is easier to look up the
critical values in Appendix F. This method requires that
we put the larger observed variance in the numerator,
and then look up the critical value for αy2 instead of the
chosen α.

• The test statistic for the folded F test is

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 Chapter 10
LO10-8 10.7 Comparing Two Variances
Assumptions of the F Test
• The F test assumes that the populations being sampled are
normal.
• It is sensitive to non-normality of the sampled populations.
• MINITAB reports both the F test and an alternative Levene’s test
and p-values.

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