Dhananjay Mudras
Roll no - 10
Group 2

Null Hypothesis

Definition

A type of hypothesis used in statistics that proposes that no statistical significance exists in a set of given observations. The null hypothesis attempts to show that no variation exists between variables, or that a single variable is no different than zero. It is presumed to be true until statistical evidence nullifies it for an alternative hypothesis.

The null hypothesis assumes that any kind of difference or significance you see in a set of data is due to chance.

Critical Value Test

The critical value(s) for a hypothesis test is a threshold to which the value of the test statistic in a sample is compared to determine whether or not the null hypothesis is rejected.

In statistics, a critical value is the value corresponding to a given significance level. This cutoff value determines the boundary between those samples resulting in a test statistic that leads to rejecting the null hypothesis and those that lead to a decision not to reject the null hypothesis. If the calculated value from the statistical test is less than the critical value, then you fail to reject the null hypothesis. If the calculated statistic is outside of the critical value, then you reject the null hypothesis and are forced to accept the alternate hypothesis

The critical value for any hypothesis test depends on the significance level at which the test is carried out, and whether the test is one-sided or two-sided.

Business Apllication

A person sees that his investment strategy produces higher average returns than simply buying and holding a stock. The null hypothesis claims that there is no difference between the two average returns, and the person has to believe this until he proves otherwise. Refuting the null hypothesis would require showing statistical significance, which can be found using a variety of tests. If the person conducts one of these tests and proves that the difference between his returns and the buy-and-hold returns is significant, he can then refute the null hypothesis.

Sources: http://www.stats.gla.ac.uk/steps/glossary/hypothesis_testing.html#h0