The Central Limit

Theorem and
Hypothesis Testing
Presented by:
Ariate, Hanny Grace A.
Hayagan, Jeneva T.
Paraon, Aileen Mae R.
Sampling Distributions
 The probability distribution of a statistic.

Basically, the field of statistical inference is

concerned with generalizations and predictions about
population. Samples drawn from a population provide
probability distributions of important statistics which
allows us to learn information about parameters.
SAMPLING DISTRIBUTION OF THE MEANS
 From a random sample of size n taken from a population,
we were able to compute important statistics, the sample
mean for instance. If we repeat the experiment over and
over again, this will result in many values of . The sample
mean which depend only on the observed sample is a
random variable and have a probability distribution. The
probability distribution of the sample mean is called the
sampling distribution of the means.
If is the mean of a random sample of n observations
taken from a normal population with mean  and variance ,
then random variable has the normal distribution with
mean and the variance given by,

The Central Limit Theorem
 As the sample size n increases without limit, the
shape of the distribution of the sample means taken
with replacement from a population with mean and
standard deviation will approach a normal distribution.
This distribution will have a mean and standard
deviation .
The Central Limit Theorem
 If the sample size is sufficiently large, the central
limit theorem can be used to answer questions about
sample means in the same manner that the normal
distribution can be used to answer questions about
individual values. The only difference is that a new
formula must be used for the z values. It is

z=
 If a large number of samples of a given size are
selected from a normally distributed population, or if a
large number of samples of a given size is greater than or
equal to 30 are selected from a population which is not
normally distributed, and the sample means are
computed. Their percentages indicate the areas of the
regions.

34.13% 34.13%

13.59% 13.59%

2.28% 2.28%
It’s important to remember two things when you use
central limit theorem:

1. When the original variable is normally distributed,

the distribution of the sample means will be
normally distributed, for any sample size n.

2. When the distribution of the original variable might

not be normal, a sample size of 30 or more is needed
to use the normal distribution to approximate the
distribution of the sample means. The larger the
sample, the better the approximation will be.
Example:
If a certain machine makes electrical inductors having a
mean inductive reactance of 40 ohms and a standard
deviation of 2 ohms, what is the probability that a
random sample of 36 of these inductors will have a
combined inductive reactance of more than 1,458 ohms?
Solution:
The
 probability that the combined inductive reactance of
the 36 inductors is exceeding 1,458 ohms is equal to the
probability that the mean will exceed

Thus,
Example:
Suppose salaries at a very large corporation has a mean
of 62,000 pesos and a standard deviation of 32,000
pesos. If 100 employees are randomly selected, what is
the probability their average salary exceeds 66,000
pesos?
Solution:
Thus,

Hypothesis Testing
Concepts of Hypothesis Testing
There are two hypotheses-the null and alternative hypothesis. The
alternative hypothesis only comes into play when the null
hypothesis is rejected.
We begin with the unusual thing: that the claim is correct or the
null hypothesis is true.
Gather enough evidence to disprove the null hypothesis.
There are two possible decisions: to reject the null hypothesis or to
accept the null hypothesis.
Two errors may also occur. Rejecting a true null hypothesis or
failing to reject a false null hypothesis.
Five-Step Procedure for Testing of
Hypothesis
Hypothesis - is a statement about the population

developed for the purpose of testing (Keller and
Warrack, 2004).
a. State the null hypothesis and alternate hypothesis.
The null hypothesis is denoted by . The subscription O
in H gives us a guide on how to state the null hypothesis. It
implies “no difference”. The null hypothesis should be
stated by saying “There is no significant difference…” or
“There is no relationship…” or “There is no change…”
Rejection of the null hypothesis directly results
acceptance of the alternate hypothesis denoted by The
alternate hypothesis only comes into play once the
decision calls for the rejection of null hypothesis.
To state alternate hypothesis, we negate the null
hypothesis. Example, “There is a significant difference …”
The alternate hypothesis will tell us if the test is one-
tailed test or two-tailed test.
One-tailed test is a test where the area of rejection is at
either side. Two-tailed test on the other hand is a test
where the areas of rejection are both of a distribution.
One-tailed Test

Area of
rejection

Area of
rejection
Two-tailed Test

Area of Area of
rejection rejection
Example

A test was administered to two groups of students- the
HRM students group and the tourism group. At the
significance level, is there difference between the scores
obtained by the two groups of students?
Solution:
There is no significant difference between the
scores obtained by the two groups of students.
There is significant difference between the
score obtained by the two groups of students.
If we say, “there is difference…”, this is susceptible of two
meanings: (a) that the mean score of the HRM student
group may be higher then the mean score of tourism
student group; and (b) that the mean score of HRM
student group may be lower than the mean score of
tourism student group.
If the alternate hypothesis poses two meanings, this is
called non-directional. In this case, we use the two-
tailed test.
Example

A teacher employed two different teaching strategies in presenting
her lesson: lecture and discussion method. After the presentation, a
30-point quiz was given. The mean score of the students where the
discussion method was the strategy used was found out to be 25 with a
standard deviation of 3. the mean score of the students where the
lecture method was used found out to be 19 with standard deviation
of 3.2. at the .01 significance level, can we conclude that the discussion
method is more effective than the lecture method?
Solution:
There is no significant difference between the two teaching
strategies. Or
The discussion method is as effective as the lecture method.
Discussion method is more effective than the lecture
method.
Notice that the alternate hypothesis is very specific. The
problem only requires to the test that the discussion
method is more effective than the lecture method. The
alternate hypothesis is directional. In this case we use the
one-tailed test.
 b) Set the desired level of significance
The level of significance is also termed as alpha or level of
risk and is denoted by . The alpha level can be a value less
than or equal to 10%. Traditionally, what is being used
0.05 or 5% for consumer research project, .01 for quality
assurance and .10 for political polling(Keller and
Warrack, 2004). But you as the researcher can choose the
level of significance you want to use in your study.
Level of risk is the probability of rejecting a true null
hypothesis.
If the null hypothesis is true and is rejected, it is called
type I error. And if the null hypothesis is false and is
accepted, it is called type II error.

Decision

Null Hypothesis

Reject Accept

is true Type I Error Correct Decision

is false Correct Decision Type II Error

 Now let us see the relationship of the level of
significance with the type of test as one-tailed test or two-
tailed test.
Example: A test was administered to two groups of
students- the HRM students group and the tourism group. At
the significance level, is there difference between the scores
obtained by the two groups of students?
Step 1. State the null hypothesis and alternate
hypothesis.
There is no significant difference between the
scores obtained by the two groups of students.
There is significant difference between the score
obtained by the two groups of students.

Take note the alternate null hypothesis is directional. The

two-tailed test is used.
Step 2. Set the desired level of significance.
The alpha level given in the problem is .05 or 5% we are
allotting 5% probability of rejecting a true null hypothesis.
We have to split 5% into two because in two-tailed test, the
areas of rejection are at both sides.

Area of
Acceptance
Area of Area of
rejection rejection
.025 .475 .475 .025

There is a dividing line between the area of rejection and the

area of acceptance. The point that divides the area of rejection
and the area of acceptance is called the critical value.
Step 3. Determine the appropriate test statistics.

Factors to consider in selecting the appropriate test statistic.

1. Type of Data
Data can be classified as quantitative or qualitative. Nominal
and ordinal levels fall under qualitative. Interval and ratio fall
under quantitative. If we are dealing with quantitative data, we
will used the parametric tests. These are the t-test, z-test or F-
test. If we are dealing with qualitative data, we will use non-
parametric tests. To mention some, we have Chi-square, Mann-
Whitney U Test, etc.
2. Purpose of the study
We may want to conduct a study to determine whether
relationship exists between two variables.

3. Number of Observations
If population standard deviation is not given, we may use t-
test or z-test depending upon the number of observations.

Step 4. Compute Test Statistic as a Basis for Decision

After we have identified the appropriate test statistic, we are
now ready to compute. The value that we obtain in our solution
is called the computed value. Then we will compare this
computed value, together with the critical value will helps us
make a decision on whether we’re going to reject or accept the
null hypothesis.
Step 5. Formulate the Decision
We reject the null hypothesis if the absolute value of the
computed value is greater than the critical value for the
computed value falls under the area of rejection. On the other
hand, if absolute value of the computed value is less than or
equal to the critical value, we accept the null hypothesis.