Testing the hypothesis - chi square test, Financial Management

Assignment Help:

Testing the Hypothesis

To test the null hypothesis, we compare the observed and the expected frequencies. If the actual and the expected values are nearly equal to each other we accept the null hypothesis and if there is a large difference between the two values we reject the null hypothesis. This is what we do as far as observation of the data is concerned and then reaching a conclusion. But mathematically, we employ the chi square statistic given by

  1083_chi square test formula.png

where,

         fo is the observed frequency

         fe is the expected frequency.

If this value happens to be smaller, then we conclude that there is a little difference between the actual and the expected frequencies and if the difference is larger, then we conclude that the actual and the expected values are not equal. This is identical to the conclusion where we reach by observing the data. Further this value is compared with the value obtained from the table. We look at how the value is obtained from the table.

fo

fe

       fo - fe

      (fo - fe)2

(fo - fe)2/(fe)


400

475

-75

5625

11.84

550

475

75

5625

11.84

450

475

-25

  625

  1.32

500

475

25

  625

  1.32

600

525

75

5625

10.71

450

525

-75

5625

10.71

550

525

25

  625

  1.19

500

525

-25

  625

  1.19


Total

 

 

 

50.12

The value of the Chi Square Statistic is  506_chi square test formula1.png  = 50.12.


Related Discussions:- Testing the hypothesis - chi square test

How can we calculate the average inventory, Inventory days (Average in...

Inventory days (Average inventory/Cost of sales) x 365days Average inventory can be arrived by taking this year's and last year's inventory values and dividing by 2 - (Ope

Investment objectives, Investment Objectives: Any investment should alw...

Investment Objectives: Any investment should always start with identifying its objective. Thus, the first step in the pension fund investment management system is defining the

ABF, HOW TO CALCULATE ASSESSED BANK FINANCE

HOW TO CALCULATE ASSESSED BANK FINANCE

Define discounting the cash flows in the apv model, What is the intuition o...

What is the intuition of discounting the several cash flows in the APV model at fixed discount rates? The APV model is a value-additivity method where total value is defined by t

Measurement of interest rate risk, Changes in the bond value is inversely ...

Changes in the bond value is inversely related to the change in the interest rates. If an investor holds a long bond position, he would incur loss if the in

Who owns a credit union, Who owns a credit union? Explain. The term Cre...

Who owns a credit union? Explain. The term Credit unions are owned by their members. While credit union members put money in their credit union, they are not exactly "depositin

MM., What are the assumptions of MM(Modigliani Miller) approach?

What are the assumptions of MM(Modigliani Miller) approach?

The key stages of a typical procurement cycle, QUESTION 1 Discuss the r...

QUESTION 1 Discuss the role and contribution of the procurement function in an organisation. QUESTION 2 Discuss the main objectives of purchasing negotiations. Compare

What is the maximum additional short-term funding, B.J. Industries has a cu...

B.J. Industries has a current ratio of 2.5, with $2.5 million in current assets.  Due to sales growth, the company wants to expand accounts receivable and inventories by

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd