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

Corporate bonds, Corporate bonds are debt securities issued by privat...

Corporate bonds are debt securities issued by private and public corporations. These bonds are issued to meet specific requirements like building a new plant, pur

Calculate the weighted average cost, XYZ Energy Solutions plc (XYZ) has spe...

XYZ Energy Solutions plc (XYZ) has spent €12m designing and developing a new generation of domestic air source heat pumps. These new domestic heat pumps can easily be fitted to exi

Define the hirfindahl-hirschman index, What is the Hirfindahl-Hirschman Ind...

What is the Hirfindahl-Hirschman Index? A: The Hirfindahl-Hirschman Index, or HHI, is the standard measure employed by economists to evaluate market concentration. The greater

Cost-volume-profit analysis, Cost-Volume-Profit Analysis The Cost-Volum...

Cost-Volume-Profit Analysis The Cost-Volume-Profit (CVP) analysis provides answers to vital questions such as: At what sales volume would the firm break-even? How sensitive is

Leveraged buyout (lbo), Leveraged Buyout (LBO) Acquisition of an organi...

Leveraged Buyout (LBO) Acquisition of an organization through the accumulation of 70 % or more of the organizations total capitalized debt.

A-credit, A-Credit is the highest credit grade existing as allotted to a bo...

A-Credit is the highest credit grade existing as allotted to a borrower by a lender. Lenders use a credit grading system to make the borrowers eligible. The more the borrower's cre

Role of government notes and bonds in finance national debt, Explain the vi...

Explain the vital role of government notes and bonds in the finance national debt. Government notes and bonds are issued within the USA by the US Treasury to finance national d

What do you mean by cash flow ratios, Q. What do you mean by Cash Flow Rati...

Q. What do you mean by Cash Flow Ratios? Cash Flow Ratios: - Cash Flow Ratios are an additional device of cash management. Some important cash flow ratios are: (i) Cash Turn

State about the quick ratio - position ratios, State about the Quick ratio ...

State about the Quick ratio or acid test Quick ratio = Current assets less inventories /Current liabilities(times) This  ratio  measures  immediate  solvency  of  a  busin

Describe the techniques of gantt charts, Due to the complexity of the tasks...

Due to the complexity of the tasks involved in many projects, communication of responsibility for those tasks is often helped by means of graphical planning techniques.

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