5.1 - Introduction to Hypothesis Testing

Previously we used confidence intervals to estimate unknown population parameters. We compared confidence intervals to specified parameter values and when the specific value was contained in the interval, we concluded that there was not evidence of a difference between the population parameter and the specified value. In other words, any values within the confidence intervals were reasonable estimates of the population parameter and any values outside of the confidence intervals were not reasonable estimates. Here, we are going to look at a more formal method for testing whether a given value is a reasonable value of a population parameter. To do this we need to have a hypothesized value of the population parameter. 

In this lesson we will compare data from a sample to a hypothesized parameter. In each case, we will compute the probability that a population with the specified parameter would produce a sample statistic as extreme or more extreme to the one we observed in our sample. This probability is known as the p-value and it is used to evaluate statistical significance.

p-value
Given that the null hypothesis is true, the probability of obtaining a sample statistic as extreme or more extreme than the one in the observed sample, in the direction of the alternative hypothesis 

A test is considered to be statistically significant when the p-value is less than or equal to the level of significance, also known as the alpha (\(\alpha\)) level. For this class, unless otherwise specified, \(\alpha=0.05\); this is the most frequently used alpha level in many fields. 

Sample statistics vary from the population parameter randomly. When results are statistically significant, we are concluding that the difference observed between our sample statistic and the hypothesized parameter is unlikely due to random sampling variation.