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

What is financing decision, What is Financing Decision Provision of ...

What is Financing Decision Provision of funds required at proper time is one of theprimary tasks of finance manager. Identification of the sources, deciding whichtypes of fu

Estimate the total rate of return, Question: Explain: (a) the advant...

Question: Explain: (a) the advantages and disadvantages, to a company, of debt finance over equity finance; (b) the reasons why a company may choose to issue preference s

Factoring, Factoring Denotes of enhancing a business's cash flow whereb...

Factoring Denotes of enhancing a business's cash flow whereby outside organizations pays a firm a certain portion of its trade debts and then gets the full amount of cash from

Yield spread strategies, Bond market can be classified into various s...

Bond market can be classified into various segments based on the nature of characteristics such as type of issuer (central bank, corporate etc.), credit risk (ris

Cost of capital, Dividends are expected to grow at a constant rate of 5 per...

Dividends are expected to grow at a constant rate of 5 percent per year in the future. Firms last dividend was $1 and stock price 10 dollars the firms beta 1,2 the rate of return o

Write a note on underwriting, Question 1 Explain the components of Indian ...

Question 1 Explain the components of Indian Financial System Question 2 Write a short note on Primary and Secondary markets Question 3 Explain the Investment optio

Determinants of working capital, Q. Determinants of Working Capital? D...

Q. Determinants of Working Capital? Determinants of Working Capital: - The working capital necessity is determined by a large number of factors but generally the following fa

What is the cash flows from financing activities, Cash flows from financing...

Cash flows from financing activities: Items included in this heading are: Cash receipts Cash payments Cash  receipts  from  iss

Relevant and irrelevant cost, The first involved the creation of spreadshee...

The first involved the creation of spreadsheets to resolve some problems for an organization. You will need to model the problem roughly before you start to spreadsheet and you wil

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