Hypothesis Testing Steps of a Statistical Significance Test. 1. Assumptions Type of data, form of population, method of sampling, sample size 2. Hypotheses Null hypothesis, H o (parameter value for “no effect”) Alternative hypothesis, H a (alternative parameter values)
3. Test statistic Compares point estimate to null hypothesized parameter value 4. P-value Weight of evidence about H o ; smaller P is more contradictory 5. Conclusion Report P-value Formal decision.
Alpha or significance levels: The " - level is a number such that one reject if H o if the P-value is less than or equal to it. The " - level is also called the significance level of the test. The most common " - levels are.05 and.01.
Type I and Type II Errors: A Type I error occurs when H o is rejected, even though it is true. A Type II error occurs when H o is not rejected, even though it is false.