ONE-SIDED t TESTS

null hypothesis:

fX

H0: = 0

alternative hypothesis: H1: = 1

2.5%

2.5%
02sd 0sd

0+sd 1+2sd 1

This sequence explains the logic behind a one-sided t test.

ONE-SIDED t TESTS

null hypothesis:

fX

H0: = 0

alternative hypothesis: H1: = 1

2.5%

2.5%
02sd 0sd

0+sd 1+2sd 1

We will start by considering the case where can take only two possible values: 0, as
under the null hypothesis, and 1, the only possible alternative.
2

ONE-SIDED t TESTS

null hypothesis:

fX

H0: = 0

alternative hypothesis: H1: = 1

2.5%

2.5%
02sd 0sd

0+sd 1+2sd 1

An example of this situation is where you are selling computer accessories and among your
products there are two types of removable lap-top batteries: regular (average charge
duration 0) and long life (average charge duration 1).
3

ONE-SIDED t TESTS

null hypothesis:

fX

H0: = 0

alternative hypothesis: H1: = 1

2.5%

2.5%
02sd 0sd

0+sd 1+2sd 1

You have been sent an unmarked shipment and you take a sample and see how long they
last. Your null hypothesis is that they are regular batteries.
4

ONE-SIDED t TESTS

null hypothesis:

fX

H0: = 0

alternative hypothesis: H1: = 1

2.5%

2.5%
02sd 0sd

0+sd 1+2sd 1

Suppose that the sample outcome is as shown. You would not reject the null hypothesis
because the sample estimate lies within the acceptance region for H0.
5

ONE-SIDED t TESTS

null hypothesis:

fX

H0: = 0

alternative hypothesis: H1: = 1

2.5%

2.5%
02sd 0sd

0+sd 1+2sd 1

Here you would reject the null hypothesis and conclude that the shipment was of long life
batteries.
6

ONE-SIDED t TESTS

null hypothesis:

fX

H0: = 0

alternative hypothesis: H1: = 1

2.5%

2.5%
02sd 0sd

0+sd 1+2sd 1

Here you would stay with the null hypothesis.

ONE-SIDED t TESTS

null hypothesis:

fX

H0: = 0

alternative hypothesis: H1: = 1

2.5%

2.5%
02sd 0sd

0+sd 1+2sd 1

A sample outcome such as this one gives rise to a serious problem. It lies in the rejection
region for H0, so our first impulse would be to reject H0.
8

ONE-SIDED t TESTS

null hypothesis:

fX

H0: = 0

alternative hypothesis: H1: = 1

2.5%

2.5%
02sd 0sd

0+sd 1+2sd 1

But to reject H0 and go with H1 is nonsensical. Granted, the sample outcome seems to
contradict H0, but it contradicts H1 even more strongly.
9

ONE-SIDED t TESTS

null hypothesis:

fX

H0: = 0

alternative hypothesis: H1: = 1

2.5%

2.5%
02sd 0sd

0+sd 1+2sd 1

The probability of getting a sample outcome like this one is much smaller under H1 than it is
under H0.
10

ONE-SIDED t TESTS

fX

null hypothesis:

H0: = 0

alternative hypothesis: H1: = 1

2.5%
02sd 0sd

0+sd 1+2sd 1

For this reason the left tail should be eliminated as a rejection region for H0. We should use
only the right tail as a rejection region.
11

ONE-SIDED t TESTS

fX

null hypothesis:

H0: = 0

alternative hypothesis: H1: = 1

2.5%
02sd 0sd

0+sd 1+2sd 1

The probability of making a Type I error, if H0 happens to be true, is now 2.5%, so the
significance level of the test is now 2.5%.
12

ONE-SIDED t TESTS

fX

null hypothesis:

H0: = 0

alternative hypothesis: H1: = 1

5%

02sd 0sd

0+sd 1+2sd 1

We can convert it back to a 5% significance test by building up the right tail until it contains
5% of the probability under the curve. It starts 1.645 standard deviations from the mean.
13

ONE-SIDED t TESTS

fX

null hypothesis:

H0: = 0

alternative hypothesis: H1: = 1

5%

02sd 0sd

0+sd 1+2sd 1

Why would we want to do this? For the answer, we go back to the trade-off between Type I
and Type II errors.
14

ONE-SIDED t TESTS

fX

null hypothesis:

H0: = 0

alternative hypothesis: H1: = 1

5%

02sd 0sd

0+sd 1+2sd 1

With a 5% test, there is a greater chance of making a Type I error if H0 happens to be true,
but there is less risk of making a Type II error if it happens to be false.
15

ONE-SIDED t TESTS

fX

null hypothesis:

H0: = 0

alternative hypothesis: H1: = 1

5%

02sd 0sd

0+sd 1+2sd 1

Note that the logic for dropping the left tail depended only on 1 being greater than 0. It did
not depend on 1 being any specific value.
16

ONE-SIDED t TESTS

fX

null hypothesis:

H0: = 0

alternative hypothesis: H1: > 0

5%

02sd 0sd

0+sd 1+2sd 1

Hence we can generalize the one-sided test to cover the case where the alternative
hypothesis is simply that is greater than 0.
17

ONE-SIDED t TESTS

fX

null hypothesis:

H0: = 0

alternative hypothesis: H1: > 0

5%

02sd 0sd

0+sd 1+2sd 1

To justify the use of a one-sided test, all we have to do is to rule out, on the basis of
economic theory or previous empirical experience, the possibility that is less than 0.
18

ONE-SIDED t TESTS

null hypothesis:

fX

H0: = 0

alternative hypothesis: H1: < 0

5%

02sd 0sd

0+sd 1+2sd 1

Sometimes, given a null hypothesis H0: = 0, on the basis of economic theory or previous
experience, you can rule out the possibility of being greater than 0.
19

ONE-SIDED t TESTS

null hypothesis:

fX

H0: = 0

alternative hypothesis: H1: < 0

5%

02sd 0sd

0+sd 1+2sd 1

In this situation you would also perform a one-sided test, now with the left tail being used
as the rejection region. With this change, the logic is the same as before.
20

ONE-SIDED t TESTS

null hypothesis:

fX

H0: = 0

alternative hypothesis: H1: = 1

2.5%

2.5%
02sd 0sd

0+sd 1+2sd 1

We will next investigate how the use of a one-sided test improves the trade-off between the
risks of making Type I and Type II errors.
21

ONE-SIDED t TESTS

null hypothesis:

fX

H0: = 0

alternative hypothesis: H1: = 1

2.5%

2.5%
02sd 0sd

0+sd 1+2sd 1

We will start by returning to the case where can take only two possible values, 0 and 1.
22

ONE-SIDED t TESTS

null hypothesis:

fX

H0: = 0

alternative hypothesis: H1: = 1

2.5%

2.5%
02sd 0sd

0+sd 1+2sd 1

Suppose that we use a two-sided 5% significance test. If H0 is true, there is a 5% risk of

making a Type I error.
23

ONE-SIDED t TESTS

null hypothesis:

fX

H0: = 0

alternative hypothesis: H1: = 1

2.5%

2.5%
02sd 0sd

0+sd 1+2sd 1

However, H0 may be false. In that case the probability of not rejecting it and making a Type
II error is given by the blue shaded area.
24

ONE-SIDED t TESTS

null hypothesis:

fX

H0: = 0

alternative hypothesis: H1: = 1

2.5%

2.5%
02sd 0sd

0+sd 1+2sd 1

This area gives the probability of the estimate lying within the acceptance region for H0, if H1
is in fact true.
25

ONE-SIDED t TESTS

fX

null hypothesis:

H0: = 0

alternative hypothesis: H1: > 0

5%

02sd 0sd

0+sd 1+2sd 1

Now suppose that you use a one-sided test, taking advantage of the fact that it is irrational
to reject H0 if the estimate is in the left tail.
26

ONE-SIDED t TESTS

fX

null hypothesis:

H0: = 0

alternative hypothesis: H1: > 0

5%

02sd 0sd

0+sd 1+2sd 1

Having expanded the right tail to 5%, we are still performing a 5% significance test, and the
risk of making a Type I error is still 5%, if H0 is true.
27

ONE-SIDED t TESTS

fX

null hypothesis:

H0: = 0

alternative hypothesis: H1: > 0

5%

02sd 0sd

0+sd 1+2sd 1

But if H0 is false, the risk of making a Type II error is smaller than before. The probability of
an estimate lying in the acceptance region for H0 is now given by the red area.
28

ONE-SIDED t TESTS

fX

null hypothesis:

H0: = 0

alternative hypothesis: H1: = 1

02sd 0sd

0+sd 1+2sd 1

This is smaller than the blue area for the two-sided test.

29

ONE-SIDED t TESTS

fX

null hypothesis:

H0: = 0

alternative hypothesis: H1: = 1

02sd 0sd

0+sd 1+2sd 1

Thus, with no increase in the probability of making a Type I error (if H0 is true), we have
reduced the probability of making a Type II error (if H0 is false).
30

ONE-SIDED t TESTS

fX

null hypothesis:

H0: = 0

alternative hypothesis: H1: = 1

02sd 0sd

0+sd 1+2sd 1

When the alternative hypothesis is H1: > 0 or H1: < 0, the more general (and more
typical) case, we cannot draw this diagram.
31

ONE-SIDED t TESTS

fX

null hypothesis:

H0: = 0

alternative hypothesis: H1: = 1

02sd 0sd

0+sd 1+2sd 1

Nevertheless we can be sure that, by using a one-sided test, we are reducing the probability
of making a Type II error, if H0 happens to be false.
32

ONE-SIDED t TESTS

H0: = 0

null hypothesis:

fX

alternative hypothesis: H1: 0

reject H0

do not reject H0

reject H0

2.5%

2.5%
1.96
sd

1.96 sd

One-sided tests are often particularly useful where the analysis relates to the evaluation of
treatment and effect. Suppose that a number of units of observation receive some type of
treatment and Xi is a measure of the effect of the treatment for observation i.
33

ONE-SIDED t TESTS

H0: = 0

null hypothesis:

fX

alternative hypothesis: H1: 0

reject H0

do not reject H0

reject H0

2.5%

2.5%
1.96
sd

1.96 sd

To demonstrate that the treatment did have an effect, we set up the null hypothesis H0: = 0
and see if we can reject it, given the sample average X.
34

ONE-SIDED t TESTS

H0: = 0

null hypothesis:

fX

alternative hypothesis: H1: 0

reject H0

do not reject H0

reject H0

2.5%

2.5%
1.96
sd

1.96 sd

If you use a two-sided 5% significance test, X must be 1.96 standard deviations above or
below 0 if you are to reject H0.
35

ONE-SIDED t TESTS

H0: = 0

null hypothesis:

fX

alternative hypothesis: H1: > 0

do not reject H0

reject H0

2.5%
1.96
sd

1.65 sd

However, if you can justify the use of a one-sided test, for example with H1: > 0, your
estimate has to be only 1.65 standard deviations above 0.
36

ONE-SIDED t TESTS

H0: = 0

null hypothesis:

fX

alternative hypothesis: H1: > 0

do not reject H0

reject H0

2.5%
1.96
sd

1.65 sd

This makes it easier to reject H0 and thereby demonstrate that the treatment has had a
significant effect.
37

ONE-SIDED t TESTS

H0: = 0

null hypothesis:

fX

alternative hypothesis: H1: > 0

do not reject H0

reject H0

2.5%
1.96
sd

1.65 sd

Throughout this sequence, it has been assumed that the standard deviation of the
distribution of b2 is known, and the normal distribution has been used in the diagrams.
38

ONE-SIDED t TESTS

H0: = 0

null hypothesis:

fX

alternative hypothesis: H1: > 0

do not reject H0

reject H0

2.5%
1.96
sd

1.65 sd

In practice, of course, the standard deviation has to be estimated as the standard error, and
the t distribution is the relevant distribution. However, the logic is exactly the same.
39

ONE-SIDED t TESTS

H0: = 0

null hypothesis:

fX

alternative hypothesis: H1: > 0

do not reject H0

reject H0

2.5%
1.96
sd

1.65 sd

At any given significance level, the critical value of t for a one-sided test is lower than that
for a two-sided test.
40

ONE-SIDED t TESTS

H0: = 0

null hypothesis:

fX

alternative hypothesis: H1: > 0

do not reject H0

reject H0

2.5%
1.96
sd

1.65 sd

Hence, if H0 is false, the risk of not rejecting it, thereby making a Type II error, is smaller.
41

Copyright Christopher Dougherty 2012.

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2012.11.02