Inferences About the Difference Between Interval Estimation of m1 - m2:
Two Population Means: s 1 and s 2 Unknown s 1 and s 2 Unknown
Interval Estimation of m 1 – m 2 When s 1 and s 2 are unknown, we will:
Hypothesis Tests About m 1 – m 2 • use the sample standard deviations s1 and s2
as estimates of s 1 and s 2 , and
• replace za/2 with ta/2.
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Interval Estimation of m1 - m2: Interval Estimation of m1 - m2:
s 1 and s 2 Unknown
s 1 and s 2 Unknown
Pooled
Variance
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How to conclude about s 1 and s 2 Interval Estimation of m1 - m2:
Hypothesis test for two population Variances
s 1 and s 2 Unknown
Interval Estimate
s12 s22
x1 x2 ta / 2
n1 n2
Where the degrees of freedom for ta/2 are:
2
s12 s22
df n1 n2
2 2
1 s12 1 s22
n1 1 n1 n2 1 n2
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1
Difference Between Two Population Means: Difference Between Two Population Means:
s 1 and s 2 Unknown s 1 and s 2 Unknown
Example: Specific Motors Example: Specific Motors
Specific Motors of Detroit has developed a new
Automobile known as the M car. 24 M cars and 28 J
cars (from Japan) were road tested to compare miles- Sample #1 Sample #2
per-gallon (mpg) performance. The sample statistics M Cars J Cars
are shown on the next slide. 24 cars 28 cars Sample Size
29.8 mpg 27.3 mpg Sample Mean
2.56 mpg 1.81 mpg Sample Std. Dev.
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Difference Between Two Population Means:
Point Estimate of m 1 m 2
s 1 and s 2 Unknown
Example: Specific Motors Point estimate of m1 m2 = x1 x2
Let us develop a 90% confidence interval estimate = 29.8 - 27.3
of the difference between the mpg performances of
= 2.5 mpg
the two models of automobile.
Assume: s 1 and s 2 are not equal and, also not known where:
m1 = mean miles-per-gallon for the
population of M cars
m2 = mean miles-per-gallon for the
population of J cars
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Interval Estimation of m 1 m 2: Interval Estimation of m 1 m 2:
s 1 and s 2 Unknown s 1 and s 2 Unknown
The degrees of freedom for ta/2 are:
s12 s22 (2.56) 2 (1.81) 2
2 x1 x2 ta / 2 29.8 27.3 1.711
(2.56)2 (1.81)2 n1 n2 24 28
df 24 28
24.07 24 2.5 + 1.069 or 1.431 to 3.569 mpg
2 2
1 (2.56) 2 1 (1.81) 2
24 1 24 28 1 28 We are 90% confident that the difference between
the miles-per-gallon performances of M cars and J cars
With a/2 = .05 and df = 24, ta/2 = 1.711 is 1.431 to 3.569 mpg.
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2
Hypothesis Tests About m 1 m 2: Hypothesis Tests About m 1 m 2:
s 1 and s 2 Unknown s 1 and s 2 Unknown
Hypotheses Example: Specific Motors
Can we conclude, using a .05 level of significance,
H 0 : m1 m2 D0 H 0 : m1 m2 D0 H 0 : m1 m2 D0
that the miles-per-gallon (mpg) performance of M cars
H a : m1 m 2 D0 H a : m1 m2 D0 H a : m1 m2 D0
is greater than the miles-per-gallon performance of J
Left-tailed Right-tailed Two-tailed cars?
Test Statistic
( x1 x2 ) D0
t
s12 s22
n1 n2
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Hypothesis Tests About m 1 m 2: Hypothesis Tests About m 1 m 2:
s 1 and s 2 Unknown s 1 and s 2 Unknown
p –Value and Critical Value Approaches p –Value and Critical Value Approaches
1. Develop the hypotheses. 2. Specify the level of significance. a = .05
H0: m1 - m2 < 0
3. Compute the value of the test statistic.
Ha: m1 - m2 > 0
where: ( x1 x2 ) D0 (29.8 27.3) 0
m1 = mean mpg for the population of M cars t 4.003
2 2
s s (2.56) 2 (1.81)2
m2 = mean mpg for the population of J cars 1
2
n1 n2 24 28
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Hypothesis Tests About m 1 m 2: Hypothesis Tests About m 1 m 2:
s 1 and s 2 Unknown s 1 and s 2 Unknown
p –Value Approach p –Value Approach
4. Compute the p –value. 5. Determine whether to reject H0.
The degrees of freedom for ta are: Because p–value < a = .05, we reject H0.
2
(2.56) (1.81)
2 2
We are at least 95% confident that the miles-per-
gallon (mpg) performance of M cars is greater than
df 24 28
40.566 41
2 2 the miles-per-gallon performance of J cars?.
1 (2.56)2 1 (1.81) 2
24 1 24 28 1 28
Because t = 4.003 > t.05 = 1.683, the p–value < .05.
In fact, the p–value < .005.
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3
Hypothesis Tests About m 1 m 2: Direct and Broker-Purchased Mutual Funds
s 1 and s 2 Unknown
Critical Value Approach
Millions of investors buy mutual funds choosing from
4. Determine the critical value and rejection rule. thousands of possibilities. Some funds can be purchased
directly from banks or other financial institutions whereas
For a = .05 and df = 41, t.05 = 1.683 others must be purchased through brokers, who charge a fee
Reject H0 if t > 1.683 for this service. This raises the question, Can investors do
better by buying mutual funds directly than by purchasing
5. Determine whether to reject H0. mutual funds through brokers? To help answer this
question, a group of researchers randomly sampled the
Because 4.003 > 1.683, we reject H0. annual returns from mutual funds that can be acquired
We are at least 95% confident that the miles-per- directly and mutual funds that are bought through brokers
gallon (mpg) performance of M cars is greater than and recorded the net annual returns, which are the returns
the miles-per-gallon performance of J cars?. on investment after deducting all relevant fees. These are
listed next.
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Data Which t-test
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Ex: Which major attracts higher salary Data
In the last few years, a number of web-based companies
that offer job placement services have been created. The
manager of one such company wanted to investigate the
job offers recent MBAs were obtaining. In particular, she
wanted to know whether finance majors were being
offered higher salaries than marketing majors. In a
preliminary study she randomly sampled 50 recently
graduated MBAs, half of whom majored in finance and
half in marketing. From each she obtained the highest
salary offer (including benefits).These data are listed here.
Can we infer that finance majors obtain higher salary offers
than do marketing majors among MBAs?
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