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1SHT Example

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Jennifer Edmonds

on 26 June 2012

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Transcript of 1SHT Example

Let's discuss one-sample testing for the mean when the sample size is large...

...large samples mean n> 30
...remember to let the data guide you...
What reference value will you use?
let's use the long-term returns (5-yr) in our calculations.
it appears that the data is suggesting that low risk funds perform better in the long run...
do low risk funds really perform better?
they do perform better
they do not perform better
which statement belongs in the NULL?
which statement belongs in the ALT?
is this a one- or two- tailed test?
One Sample Hypothesis Testing
for the mean, large sample sizes
This Prezi was arranged by
Jennifer J. Edmonds, PhD
Wilkes University
compares one sample to a reference group, or assumed value from the population.
than average
...and now to fill in some of the details of the sample data
(the reference value, the sample mean, etc.)
Keep in mind that you will need to sort the risk variable, and isolate the LOW risk funds only...
how many low risk funds are there?
what reference value is appropriate?
That completes step 1!
The reference value (or comparison) is the 10.8% average return rate.
this is exactly what you type into those cells
the absolute value of
...so what conclusion is the right one?
Step 2
time for Step 3 - State the Conclusions and Make a Decision
p-value > alpha
reject or do not reject the null?
and what does that conclusion mean?
Low risk funds do perform better over a 5-yr period, compared to average performance.
Let's recap what just happened...
The mutual funds data suggests that low risk funds perform slightly better than average, and we wanted to verify that this is true.
So we examined the null hypothesis that low risk funds do not perform any better.
...and by performing a 1SHT for the mean, we determined that they do indeed perform better.
Our claim was correct!
1SHT Template
Keep in mind that you will need to sort the risk variable, and isolate the LOW risk funds only...
Full transcript