Estimation and testing of hypothesis
Answers
Hypothesis testing is an act in statistics whereby an analyst tests an assumption regarding a population parameter. The methodology employed by the analyst depends on the nature of the data used and the reason for the analysis. Hypothesis testing is used to assess the plausibility of a hypothesis by using sample data.
Answer:
Estimation is the process of making predictions based on the best available information. Through the hypothesis testing process, the CFO will either reject or accept the null hypothesis.
A test statistic from a hypothesis test measures how many standard errors the observed point estimate is away from the expected null hypothesis value. If the observed value is too many standard errors from the expected value, we don't believe the null hypothesis or there is evidence against it (falsification).
Hypothesis testing is used to assess the plausibility of a hypothesis by using sample data. The test provides evidence concerning the plausibility of the hypothesis, given the data. Statistical analysts test a hypothesis by measuring and examining a random sample of the population being analyzed.
Five Steps in Hypothesis Testing:
- Specify the Null Hypothesis.
- Specify the Alternative Hypothesis.
- Set the Significance Level (a)
- Calculate the Test Statistic and Corresponding P-Value.
- Drawing a Conclusion.
Usually, you don't want to state a hypothesis as a question. You believe in something, and you're seeking to prove it. For example: If I raise the temperature of a cup of water, then the amount of sugar that can be dissolved in it will be increased.