HYPOTHESES

It is tentative answer to research question It is tentative because its genuineness can

be evaluated only after it has been used empirically

Hypothesis are useful and they guide research process in proper direction in mere fact finding investigation

In all analytical and experimental studies hypothesis should be set up in order to give a proper direction to them.

HYPOTHESIS TESTING

Number of steps are involved in testing hypothesis Formulate hypothesis Set up suitable significance level e.g. 5% or1% Choose test criterion e.g. t-test, Z-test, f-test & Chi Square test Compute the statistic Make decision e.g. whether to accept or reject Null/ Alternative

hypothesis

Formulate Hypothesis:Research: Analytical study of FDI and its impact on

economy in last decade.(2002-2012)Hypothesis:There is positive relationship between FDI & GDP

We develop Null Hypothesis Ho for testing the hypothesis.

This null hypothesis is specifically formulate for testing for possible rejection or nullification

The null hypothesis is always a statement of no change or no difference or no relationship

e.g. There is no positive relationship between FDI & GDP

H0 is accompanied by an alternative Hypothesis Ha

e.g. H0 -There is no positive relationship between

FDI & GDPHa -There is positive relationship between FDI &

GDPBoth the H0 & Ha are expressed in terms

population parameter not in terms of sample statistics

There are two types of errors that can be committed in making decisions regarding accepting and rejecting the null hypothesis.

If null hypothesis which is actually true is rejected, the decision based on the sample evidence is wrong. Such an error is called type I error.

If the null hypothesis is false but is not rejected, then the error is called type II error.

LEVEL OF SIGNIFICANCE

It signifies the probability of committing type I error α and generally taken as equal to 5% (α = 0.05)

This means that even after testing the hypothesis when decision is made, we may still committing an error in rejecting null hypothesis

Sometimes the value of α is taken as 0.01 but it is the discretion of the investigator, depending upon the sensitivity of the study.

DECISION

If the calculated test value is larger than the corresponding critical value (table value), we reject the null hypothesis & conclude that the research hypothesis is supported

If the table value is larger than the calculated value, the research hypothesis is not supported.