Econ 3790: Business and Economics Statistics. Instructor: Yogesh Uppal

Transcription

1 Econ 3790: Business and Economics Statistics Instructor: Yogesh Uppal

2 Chapter 12 Goodness of Fit Test: A Multinomial Population Test of Independence

3 Hypothesis (Goodness of Fit) Test for Proportions of a Multinomial Population 1. State the null and alternative hypotheses. H 0 : The population follows a multinomial distribution with specified probabilities for each of the k categories H a : The population does not follow a multinomial distribution with specified probabilities for each of the k categories 2. Select a level of significance ( )( ) and find a critical value from Chi-squared distribution with k-1 k 1 degrees of freedom.

4 Hypothesis (Goodness of Fit) Test for Proportions of a Multinomial Population 4. Compute the value of the test statistic. 2 k 2 ( fi ei ) i 1 e i where: f i = observed frequency for category i e i = expected frequency for category i k = number of categories Note: The test statistic has a chi-square distribution with k 1 df provided that the expected frequencies are 5 or more for all categories.

5 Hypothesis (Goodness of Fit) Test for Proportions of a Multinomial Population Select a random sample and record the observed frequency, f i, for each of the k categories. Assuming H 0 is true, compute the expected frequency, e i, in each category by multiplying the category probability by the sample size.

6 Hypothesis (Goodness of Fit) Test for Proportions of a Multinomial Population 4. Rejection rule: p-value approach: Reject H 0 if p-value < Critical value approach: Reject H 0 if 2 2 where is the significance level and there are k - 1 degrees of freedom

7 Multinomial Distribution Goodness of Fit Test Example: Mosquito Lakes Homes Mosquito Lakes Homes manufactures four models of prefabricated homes, a two-story colonial, a log cabin, a split-level, level, and an A-frame. A Check if previous customer purchases indicate that there is a preference in the style selected. The number of homes sold of each model for 100 sales over the past two years is shown below. Split- A- Model Colonial Log Level Frame # Sold

8 Multinomial Distribution Goodness of Fit Test Hypotheses H 0 : p C = p L = p S = p A =.25 H a : The population proportions are not p C =.25, p L =.25, p S =.25, and p A =.25 where: p C = population proportion that purchase a colonial p L = population proportion that purchase a log cabin p S = population proportion that purchase a split-level level p A = population proportion that purchase an A-frameA

9 Test of Independence: Contingency Tables 1. Set up the null and alternative hypotheses. H 0 : The column variable is independent of the row variable H a : The column variable is not independent of the row variable 2. Select a level of significance ( )( ) and find a critical value from Chi-squared distribution with (n-1)(m 1)(m-1) degrees of freedom.

10 Test of Independence: Contingency Tables 3. Compute the test statistic. 2 2 ( f ij e ij ) i j e ij Select a random sample and record the observed frequency, f ij, for each cell of the contingency table. Compute the expected frequency, e ij, for each cell. e ij ( row i total)( column j total) Sample Size

11 Test of Independence: Contingency Tables 4. Determine the rejection rule. Reject H 0 if p -value < or 2 2. where is the significance level and, with n rows and m columns, there are (n - 1)(m - 1) degrees of freedom.

12 Contingency Table (Independence) Test Example: Mosquito Lakes Homes Each home sold by Mosquito Lakes Homes can be classified according to price and to style. Mosquito Lakes manager would like to determine if the price of the home and the style of the home are independent variables.

13 Contingency Table (Independence) Test Example: Mosquito Lakes Homes The number of homes sold for each model and price for the past two years is shown below. For convenience, the price of the home is listed as either $99,000 or less or more than $99,000. Price Colonial Log Split-Level A-FrameA < $99, > $99,