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A Beginner’s Guide to Hypothesis Testing in Business

• 30 Mar 2021

Becoming a more data-driven decision-maker can bring several benefits to your organization, enabling you to identify new opportunities to pursue and threats to abate. Rather than allowing subjective thinking to guide your business strategy, backing your decisions with data can empower your company to become more innovative and, ultimately, profitable.

If you’re new to data-driven decision-making, you might be wondering how data translates into business strategy. The answer lies in generating a hypothesis and verifying or rejecting it based on what various forms of data tell you.

Below is a look at hypothesis testing and the role it plays in helping businesses become more data-driven.

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What Is Hypothesis Testing?

To understand what hypothesis testing is, it’s important first to understand what a hypothesis is.

A hypothesis or hypothesis statement seeks to explain why something has happened, or what might happen, under certain conditions. It can also be used to understand how different variables relate to each other. Hypotheses are often written as if-then statements; for example, “If this happens, then this will happen.”

Hypothesis testing , then, is a statistical means of testing an assumption stated in a hypothesis. While the specific methodology leveraged depends on the nature of the hypothesis and data available, hypothesis testing typically uses sample data to extrapolate insights about a larger population.

Hypothesis Testing in Business

When it comes to data-driven decision-making, there’s a certain amount of risk that can mislead a professional. This could be due to flawed thinking or observations, incomplete or inaccurate data , or the presence of unknown variables. The danger in this is that, if major strategic decisions are made based on flawed insights, it can lead to wasted resources, missed opportunities, and catastrophic outcomes.

The real value of hypothesis testing in business is that it allows professionals to test their theories and assumptions before putting them into action. This essentially allows an organization to verify its analysis is correct before committing resources to implement a broader strategy.

As one example, consider a company that wishes to launch a new marketing campaign to revitalize sales during a slow period. Doing so could be an incredibly expensive endeavor, depending on the campaign’s size and complexity. The company, therefore, may wish to test the campaign on a smaller scale to understand how it will perform.

In this example, the hypothesis that’s being tested would fall along the lines of: “If the company launches a new marketing campaign, then it will translate into an increase in sales.” It may even be possible to quantify how much of a lift in sales the company expects to see from the effort. Pending the results of the pilot campaign, the business would then know whether it makes sense to roll it out more broadly.

Related: 9 Fundamental Data Science Skills for Business Professionals

Key Considerations for Hypothesis Testing

1. alternative hypothesis and null hypothesis.

In hypothesis testing, the hypothesis that’s being tested is known as the alternative hypothesis . Often, it’s expressed as a correlation or statistical relationship between variables. The null hypothesis , on the other hand, is a statement that’s meant to show there’s no statistical relationship between the variables being tested. It’s typically the exact opposite of whatever is stated in the alternative hypothesis.

For example, consider a company’s leadership team that historically and reliably sees $12 million in monthly revenue. They want to understand if reducing the price of their services will attract more customers and, in turn, increase revenue.

In this case, the alternative hypothesis may take the form of a statement such as: “If we reduce the price of our flagship service by five percent, then we’ll see an increase in sales and realize revenues greater than $12 million in the next month.”

The null hypothesis, on the other hand, would indicate that revenues wouldn’t increase from the base of $12 million, or might even decrease.

Check out the video below about the difference between an alternative and a null hypothesis, and subscribe to our YouTube channel for more explainer content.

2. Significance Level and P-Value

Statistically speaking, if you were to run the same scenario 100 times, you’d likely receive somewhat different results each time. If you were to plot these results in a distribution plot, you’d see the most likely outcome is at the tallest point in the graph, with less likely outcomes falling to the right and left of that point.

With this in mind, imagine you’ve completed your hypothesis test and have your results, which indicate there may be a correlation between the variables you were testing. To understand your results' significance, you’ll need to identify a p-value for the test, which helps note how confident you are in the test results.

In statistics, the p-value depicts the probability that, assuming the null hypothesis is correct, you might still observe results that are at least as extreme as the results of your hypothesis test. The smaller the p-value, the more likely the alternative hypothesis is correct, and the greater the significance of your results.

3. One-Sided vs. Two-Sided Testing

When it’s time to test your hypothesis, it’s important to leverage the correct testing method. The two most common hypothesis testing methods are one-sided and two-sided tests , or one-tailed and two-tailed tests, respectively.

Typically, you’d leverage a one-sided test when you have a strong conviction about the direction of change you expect to see due to your hypothesis test. You’d leverage a two-sided test when you’re less confident in the direction of change.

4. Sampling

To perform hypothesis testing in the first place, you need to collect a sample of data to be analyzed. Depending on the question you’re seeking to answer or investigate, you might collect samples through surveys, observational studies, or experiments.

A survey involves asking a series of questions to a random population sample and recording self-reported responses.

Observational studies involve a researcher observing a sample population and collecting data as it occurs naturally, without intervention.

Finally, an experiment involves dividing a sample into multiple groups, one of which acts as the control group. For each non-control group, the variable being studied is manipulated to determine how the data collected differs from that of the control group.

Learn How to Perform Hypothesis Testing

Hypothesis testing is a complex process involving different moving pieces that can allow an organization to effectively leverage its data and inform strategic decisions.

If you’re interested in better understanding hypothesis testing and the role it can play within your organization, one option is to complete a course that focuses on the process. Doing so can lay the statistical and analytical foundation you need to succeed.

Do you want to learn more about hypothesis testing? Explore Business Analytics —one of our online business essentials courses —and download our Beginner’s Guide to Data & Analytics .

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• Null and Alternative Hypotheses | Definitions & Examples

Null & Alternative Hypotheses | Definitions, Templates & Examples

Published on May 6, 2022 by Shaun Turney . Revised on June 22, 2023.

The null and alternative hypotheses are two competing claims that researchers weigh evidence for and against using a statistical test :

• Null hypothesis ( H 0 ): There’s no effect in the population .
• Alternative hypothesis ( H a or H 1 ) : There’s an effect in the population.

Table of contents

Answering your research question with hypotheses, what is a null hypothesis, what is an alternative hypothesis, similarities and differences between null and alternative hypotheses, how to write null and alternative hypotheses, other interesting articles, frequently asked questions.

The null and alternative hypotheses offer competing answers to your research question . When the research question asks “Does the independent variable affect the dependent variable?”:

• The null hypothesis ( H 0 ) answers “No, there’s no effect in the population.”
• The alternative hypothesis ( H a ) answers “Yes, there is an effect in the population.”

The null and alternative are always claims about the population. That’s because the goal of hypothesis testing is to make inferences about a population based on a sample . Often, we infer whether there’s an effect in the population by looking at differences between groups or relationships between variables in the sample. It’s critical for your research to write strong hypotheses .

You can use a statistical test to decide whether the evidence favors the null or alternative hypothesis. Each type of statistical test comes with a specific way of phrasing the null and alternative hypothesis. However, the hypotheses can also be phrased in a general way that applies to any test.

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The null hypothesis is the claim that there’s no effect in the population.

If the sample provides enough evidence against the claim that there’s no effect in the population ( p ≤ α), then we can reject the null hypothesis . Otherwise, we fail to reject the null hypothesis.

Although “fail to reject” may sound awkward, it’s the only wording that statisticians accept . Be careful not to say you “prove” or “accept” the null hypothesis.

Null hypotheses often include phrases such as “no effect,” “no difference,” or “no relationship.” When written in mathematical terms, they always include an equality (usually =, but sometimes ≥ or ≤).

You can never know with complete certainty whether there is an effect in the population. Some percentage of the time, your inference about the population will be incorrect. When you incorrectly reject the null hypothesis, it’s called a type I error . When you incorrectly fail to reject it, it’s a type II error.

Examples of null hypotheses

The table below gives examples of research questions and null hypotheses. There’s always more than one way to answer a research question, but these null hypotheses can help you get started.

*Note that some researchers prefer to always write the null hypothesis in terms of “no effect” and “=”. It would be fine to say that daily meditation has no effect on the incidence of depression and p 1 = p 2 .

The alternative hypothesis ( H a ) is the other answer to your research question . It claims that there’s an effect in the population.

Often, your alternative hypothesis is the same as your research hypothesis. In other words, it’s the claim that you expect or hope will be true.

The alternative hypothesis is the complement to the null hypothesis. Null and alternative hypotheses are exhaustive, meaning that together they cover every possible outcome. They are also mutually exclusive, meaning that only one can be true at a time.

Alternative hypotheses often include phrases such as “an effect,” “a difference,” or “a relationship.” When alternative hypotheses are written in mathematical terms, they always include an inequality (usually ≠, but sometimes < or >). As with null hypotheses, there are many acceptable ways to phrase an alternative hypothesis.

Examples of alternative hypotheses

The table below gives examples of research questions and alternative hypotheses to help you get started with formulating your own.

Null and alternative hypotheses are similar in some ways:

• They’re both answers to the research question.
• They both make claims about the population.
• They’re both evaluated by statistical tests.

However, there are important differences between the two types of hypotheses, summarized in the following table.

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To help you write your hypotheses, you can use the template sentences below. If you know which statistical test you’re going to use, you can use the test-specific template sentences. Otherwise, you can use the general template sentences.

General template sentences

The only thing you need to know to use these general template sentences are your dependent and independent variables. To write your research question, null hypothesis, and alternative hypothesis, fill in the following sentences with your variables:

Does independent variable affect dependent variable ?

• Null hypothesis ( H 0 ): Independent variable does not affect dependent variable.
• Alternative hypothesis ( H a ): Independent variable affects dependent variable.

Test-specific template sentences

Once you know the statistical test you’ll be using, you can write your hypotheses in a more precise and mathematical way specific to the test you chose. The table below provides template sentences for common statistical tests.

Note: The template sentences above assume that you’re performing one-tailed tests . One-tailed tests are appropriate for most studies.

If you want to know more about statistics , methodology , or research bias , make sure to check out some of our other articles with explanations and examples.

• Normal distribution
• Descriptive statistics
• Measures of central tendency
• Correlation coefficient

Methodology

• Cluster sampling
• Stratified sampling
• Types of interviews
• Cohort study
• Thematic analysis

Research bias

• Implicit bias
• Cognitive bias
• Survivorship bias
• Availability heuristic
• Nonresponse bias
• Regression to the mean

Hypothesis testing is a formal procedure for investigating our ideas about the world using statistics. It is used by scientists to test specific predictions, called hypotheses , by calculating how likely it is that a pattern or relationship between variables could have arisen by chance.

Null and alternative hypotheses are used in statistical hypothesis testing . The null hypothesis of a test always predicts no effect or no relationship between variables, while the alternative hypothesis states your research prediction of an effect or relationship.

The null hypothesis is often abbreviated as H 0 . When the null hypothesis is written using mathematical symbols, it always includes an equality symbol (usually =, but sometimes ≥ or ≤).

The alternative hypothesis is often abbreviated as H a or H 1 . When the alternative hypothesis is written using mathematical symbols, it always includes an inequality symbol (usually ≠, but sometimes < or >).

A research hypothesis is your proposed answer to your research question. The research hypothesis usually includes an explanation (“ x affects y because …”).

A statistical hypothesis, on the other hand, is a mathematical statement about a population parameter. Statistical hypotheses always come in pairs: the null and alternative hypotheses . In a well-designed study , the statistical hypotheses correspond logically to the research hypothesis.

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Statistics By Jim

Making statistics intuitive

Null Hypothesis: Definition, Rejecting & Examples

By Jim Frost 6 Comments

What is a Null Hypothesis?

The null hypothesis in statistics states that there is no difference between groups or no relationship between variables. It is one of two mutually exclusive hypotheses about a population in a hypothesis test.

• Null Hypothesis H 0 : No effect exists in the population.
• Alternative Hypothesis H A : The effect exists in the population.

In every study or experiment, researchers assess an effect or relationship. This effect can be the effectiveness of a new drug, building material, or other intervention that has benefits. There is a benefit or connection that the researchers hope to identify. Unfortunately, no effect may exist. In statistics, we call this lack of an effect the null hypothesis. Researchers assume that this notion of no effect is correct until they have enough evidence to suggest otherwise, similar to how a trial presumes innocence.

In this context, the analysts don’t necessarily believe the null hypothesis is correct. In fact, they typically want to reject it because that leads to more exciting finds about an effect or relationship. The new vaccine works!

You can think of it as the default theory that requires sufficiently strong evidence to reject. Like a prosecutor, researchers must collect sufficient evidence to overturn the presumption of no effect. Investigators must work hard to set up a study and a data collection system to obtain evidence that can reject the null hypothesis.

Related post : What is an Effect in Statistics?

Null Hypothesis Examples

Null hypotheses start as research questions that the investigator rephrases as a statement indicating there is no effect or relationship.

After reading these examples, you might think they’re a bit boring and pointless. However, the key is to remember that the null hypothesis defines the condition that the researchers need to discredit before suggesting an effect exists.

Let’s see how you reject the null hypothesis and get to those more exciting findings!

When to Reject the Null Hypothesis

So, you want to reject the null hypothesis, but how and when can you do that? To start, you’ll need to perform a statistical test on your data. The following is an overview of performing a study that uses a hypothesis test.

The first step is to devise a research question and the appropriate null hypothesis. After that, the investigators need to formulate an experimental design and data collection procedures that will allow them to gather data that can answer the research question. Then they collect the data. For more information about designing a scientific study that uses statistics, read my post 5 Steps for Conducting Studies with Statistics .

After data collection is complete, statistics and hypothesis testing enter the picture. Hypothesis testing takes your sample data and evaluates how consistent they are with the null hypothesis. The p-value is a crucial part of the statistical results because it quantifies how strongly the sample data contradict the null hypothesis.

When the sample data provide sufficient evidence, you can reject the null hypothesis. In a hypothesis test, this process involves comparing the p-value to your significance level .

Rejecting the Null Hypothesis

Reject the null hypothesis when the p-value is less than or equal to your significance level. Your sample data favor the alternative hypothesis, which suggests that the effect exists in the population. For a mnemonic device, remember—when the p-value is low, the null must go!

When you can reject the null hypothesis, your results are statistically significant. Learn more about Statistical Significance: Definition & Meaning .

Failing to Reject the Null Hypothesis

Conversely, when the p-value is greater than your significance level, you fail to reject the null hypothesis. The sample data provides insufficient data to conclude that the effect exists in the population. When the p-value is high, the null must fly!

Note that failing to reject the null is not the same as proving it. For more information about the difference, read my post about Failing to Reject the Null .

That’s a very general look at the process. But I hope you can see how the path to more exciting findings depends on being able to rule out the less exciting null hypothesis that states there’s nothing to see here!

Let’s move on to learning how to write the null hypothesis for different types of effects, relationships, and tests.

Related posts : How Hypothesis Tests Work and Interpreting P-values

How to Write a Null Hypothesis

The null hypothesis varies by the type of statistic and hypothesis test. Remember that inferential statistics use samples to draw conclusions about populations. Consequently, when you write a null hypothesis, it must make a claim about the relevant population parameter . Further, that claim usually indicates that the effect does not exist in the population. Below are typical examples of writing a null hypothesis for various parameters and hypothesis tests.

Related posts : Descriptive vs. Inferential Statistics and Populations, Parameters, and Samples in Inferential Statistics

Group Means

T-tests and ANOVA assess the differences between group means. For these tests, the null hypothesis states that there is no difference between group means in the population. In other words, the experimental conditions that define the groups do not affect the mean outcome. Mu (µ) is the population parameter for the mean, and you’ll need to include it in the statement for this type of study.

For example, an experiment compares the mean bone density changes for a new osteoporosis medication. The control group does not receive the medicine, while the treatment group does. The null states that the mean bone density changes for the control and treatment groups are equal.

• Null Hypothesis H 0 : Group means are equal in the population: µ 1 = µ 2 , or µ 1 – µ 2 = 0
• Alternative Hypothesis H A : Group means are not equal in the population: µ 1 ≠ µ 2 , or µ 1 – µ 2 ≠ 0.

Group Proportions

Proportions tests assess the differences between group proportions. For these tests, the null hypothesis states that there is no difference between group proportions. Again, the experimental conditions did not affect the proportion of events in the groups. P is the population proportion parameter that you’ll need to include.

For example, a vaccine experiment compares the infection rate in the treatment group to the control group. The treatment group receives the vaccine, while the control group does not. The null states that the infection rates for the control and treatment groups are equal.

• Null Hypothesis H 0 : Group proportions are equal in the population: p 1 = p 2 .
• Alternative Hypothesis H A : Group proportions are not equal in the population: p 1 ≠ p 2 .

Correlation and Regression Coefficients

Some studies assess the relationship between two continuous variables rather than differences between groups.

In these studies, analysts often use either correlation or regression analysis . For these tests, the null states that there is no relationship between the variables. Specifically, it says that the correlation or regression coefficient is zero. As one variable increases, there is no tendency for the other variable to increase or decrease. Rho (ρ) is the population correlation parameter and beta (β) is the regression coefficient parameter.

For example, a study assesses the relationship between screen time and test performance. The null states that there is no correlation between this pair of variables. As screen time increases, test performance does not tend to increase or decrease.

• Null Hypothesis H 0 : The correlation in the population is zero: ρ = 0.
• Alternative Hypothesis H A : The correlation in the population is not zero: ρ ≠ 0.

For all these cases, the analysts define the hypotheses before the study. After collecting the data, they perform a hypothesis test to determine whether they can reject the null hypothesis.

The preceding examples are all for two-tailed hypothesis tests. To learn about one-tailed tests and how to write a null hypothesis for them, read my post One-Tailed vs. Two-Tailed Tests .

Related post : Understanding Correlation

Neyman, J; Pearson, E. S. (January 1, 1933).  On the Problem of the most Efficient Tests of Statistical Hypotheses .  Philosophical Transactions of the Royal Society A .  231  (694–706): 289–337.

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Reader Interactions

January 11, 2024 at 2:57 pm

Thanks for the reply.

January 10, 2024 at 1:23 pm

Hi Jim, In your comment you state that equivalence test null and alternate hypotheses are reversed. For hypothesis tests of data fits to a probability distribution, the null hypothesis is that the probability distribution fits the data. Is this correct?

January 10, 2024 at 2:15 pm

Those two separate things, equivalence testing and normality tests. But, yes, you’re correct for both.

Hypotheses are switched for equivalence testing. You need to “work” (i.e., collect a large sample of good quality data) to be able to reject the null that the groups are different to be able to conclude they’re the same.

With typical hypothesis tests, if you have low quality data and a low sample size, you’ll fail to reject the null that they’re the same, concluding they’re equivalent. But that’s more a statement about the low quality and small sample size than anything to do with the groups being equal.

So, equivalence testing make you work to obtain a finding that the groups are the same (at least within some amount you define as a trivial difference).

For normality testing, and other distribution tests, the null states that the data follow the distribution (normal or whatever). If you reject the null, you have sufficient evidence to conclude that your sample data don’t follow the probability distribution. That’s a rare case where you hope to fail to reject the null. And it suffers from the problem I describe above where you might fail to reject the null simply because you have a small sample size. In that case, you’d conclude the data follow the probability distribution but it’s more that you don’t have enough data for the test to register the deviation. In this scenario, if you had a larger sample size, you’d reject the null and conclude it doesn’t follow that distribution.

I don’t know of any equivalence testing type approach for distribution fit tests where you’d need to work to show the data follow a distribution, although I haven’t looked for one either!

February 20, 2022 at 9:26 pm

Is a null hypothesis regularly (always) stated in the negative? “there is no” or “does not”

February 23, 2022 at 9:21 pm

Typically, the null hypothesis includes an equal sign. The null hypothesis states that the population parameter equals a particular value. That value is usually one that represents no effect. In the case of a one-sided hypothesis test, the null still contains an equal sign but it’s “greater than or equal to” or “less than or equal to.” If you wanted to translate the null hypothesis from its native mathematical expression, you could use the expression “there is no effect.” But the mathematical form more specifically states what it’s testing.

It’s the alternative hypothesis that typically contains does not equal.

There are some exceptions. For example, in an equivalence test where the researchers want to show that two things are equal, the null hypothesis states that they’re not equal.

In short, the null hypothesis states the condition that the researchers hope to reject. They need to work hard to set up an experiment and data collection that’ll gather enough evidence to be able to reject the null condition.

February 15, 2022 at 9:32 am

Dear sir I always read your notes on Research methods.. Kindly tell is there any available Book on all these..wonderfull Urgent

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Null Hypothesis Examples

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In statistical analysis, the null hypothesis assumes there is no meaningful relationship between two variables. Testing the null hypothesis can tell you whether your results are due to the effect of manipulating ​a dependent variable or due to chance. It's often used in conjunction with an alternative hypothesis, which assumes there is, in fact, a relationship between two variables.

The null hypothesis is among the easiest hypothesis to test using statistical analysis, making it perhaps the most valuable hypothesis for the scientific method. By evaluating a null hypothesis in addition to another hypothesis, researchers can support their conclusions with a higher level of confidence. Below are examples of how you might formulate a null hypothesis to fit certain questions.

What Is the Null Hypothesis?

The null hypothesis states there is no relationship between the measured phenomenon (the dependent variable ) and the independent variable , which is the variable an experimenter typically controls or changes. You do not​ need to believe that the null hypothesis is true to test it. On the contrary, you will likely suspect there is a relationship between a set of variables. One way to prove that this is the case is to reject the null hypothesis. Rejecting a hypothesis does not mean an experiment was "bad" or that it didn't produce results. In fact, it is often one of the first steps toward further inquiry.

To distinguish it from other hypotheses , the null hypothesis is written as ​ H 0  (which is read as “H-nought,” "H-null," or "H-zero"). A significance test is used to determine the likelihood that the results supporting the null hypothesis are not due to chance. A confidence level of 95% or 99% is common. Keep in mind, even if the confidence level is high, there is still a small chance the null hypothesis is not true, perhaps because the experimenter did not account for a critical factor or because of chance. This is one reason why it's important to repeat experiments.

Examples of the Null Hypothesis

To write a null hypothesis, first start by asking a question. Rephrase that question in a form that assumes no relationship between the variables. In other words, assume a treatment has no effect. Write your hypothesis in a way that reflects this.

Other Types of Hypotheses

In addition to the null hypothesis, the alternative hypothesis is also a staple in traditional significance tests . It's essentially the opposite of the null hypothesis because it assumes the claim in question is true. For the first item in the table above, for example, an alternative hypothesis might be "Age does have an effect on mathematical ability."

Key Takeaways

• In hypothesis testing, the null hypothesis assumes no relationship between two variables, providing a baseline for statistical analysis.
• Rejecting the null hypothesis suggests there is evidence of a relationship between variables.
• By formulating a null hypothesis, researchers can systematically test assumptions and draw more reliable conclusions from their experiments.
• What Are Examples of a Hypothesis?
• Random Error vs. Systematic Error
• Six Steps of the Scientific Method
• What Is a Hypothesis? (Science)
• Scientific Method Flow Chart
• What Are the Elements of a Good Hypothesis?
• Scientific Method Vocabulary Terms
• Understanding Simple vs Controlled Experiments
• The Role of a Controlled Variable in an Experiment
• What Is an Experimental Constant?
• What Is a Testable Hypothesis?
• Scientific Hypothesis Examples
• What Is the Difference Between a Control Variable and Control Group?
• DRY MIX Experiment Variables Acronym
• What Is a Controlled Experiment?
• Scientific Variable

A Beginner’s Guide to Hypothesis Testing in Business Analytics

• December 5, 2023
• Analytics , Statistics

Hypothesis testing is a statistical method used to make decisions about a population based on a sample. It helps business analysts draw conclusions about business metrics and make data-driven decisions. This beginner’s guide will provide an introduction to hypothesis testing and how it is applied in business analytics.

What is a Hypothesis?

A hypothesis is an assumption about a population parameter. It is a tentative statement that proposes a possible relationship between two or more variables.

In statistical terms, a hypothesis is an assertion or conjecture about one or more populations. For example, a business hypothesis could be –

“Our social media advertising results in an increase in sales.”

“Customer ratings of our product have decreased this month compared to last month.”

A hypothesis can be:

• Null hypothesis (H0) – a statement that there is no difference or no effect.
• Alternative hypothesis (H1) – a claim about the population that is contradictory to H0.

Hypothesis testing evaluates two mutually exclusive statements (H0 and H1) to determine which statement is best supported by the sample data.

Why Hypothesis Testing is Important in Business

Hypothesis testing allows business analysts to make statistical inferences about a business problem. It is an objective data-driven approach to:

• Evaluate business metrics against a target value. For example – is the current customer satisfaction score significantly lower than our target of 85%?
• Compare business metrics across time periods or categories. For example – has website conversion rate increased this month compared to last month?
• Quantify the impact of business initiatives. For example – did the email marketing campaign result in a significant increase in sales?

Some key benefits of hypothesis testing in business analytics:

• Supports data-driven decision making with statistical evidence.
• Helps save costs by making decisions backed by data insights.
• Enables measurement of success for business initiatives like marketing campaigns, new product launches etc.
• Provides a structured framework for business metric analysis.
• Reduces the influence of individual biases in decision making.

By incorporating hypothesis testing in data analysis, businesses can make sound decisions that are supported by statistical evidence.

Steps in Hypothesis Testing

Hypothesis testing involves the following five steps:

1. State the Hypotheses

This involves stating the null and alternate hypotheses. The hypotheses are stated in a way that they are mutually exclusive – if one is true, the other must be false.

Null hypothesis (H0) – represents the status quo, states that there is no effect or no difference.

Alternative hypothesis (H1) – states that there is an effect or a difference.

For example –

H0: The average customer rating this month is the same as last month.

H1: The average customer rating this month is lower than last month.

2. Choose the Significance Level

The significance level (α) is the probability of rejecting H0 when it is actually true. It is the maximum risk we are willing to take in making an incorrect decision.

Typical values are 0.10, 0.05 or 0.01. A lower α indicates lower risk tolerance. For example α = 0.05 indicates only a 5% risk of concluding there is a difference when actually there is none.

3. Select the Sample and Collect Data

The sample should be representative of the population. Data is collected relevant to the hypotheses – for example, customer ratings this month and last month.

4. Analyze the Sample Data

An appropriate statistical test is applied to analyze the sample data. Common tests used are t-tests, z-tests, ANOVA, chi-square etc. The test provides a test statistic that can be compared against critical values to determine statistical significance.

5. Make a Decision

If the test statistic falls in the rejection region, we reject H0 in favor of H1. Otherwise, we fail to reject H0 and conclude there is not enough evidence against it.

The key question is – “Is the sample data unlikely, assuming H0 is true?” If yes, we reject H0.

Types of Hypothesis Tests

There are two main types of hypothesis tests:

1. Parametric Tests

These tests make assumptions about the shape or parameters of the population distribution.

Some examples are:

• Z-test – Tests a population mean when population standard deviation is known.
• T-test – Tests a population mean when standard deviation is unknown.
• F-test – Compares variances from two normal populations.
• ANOVA – Compares means of two or more populations.

Parametric tests are more powerful as they make use of the distribution characteristics. But the assumptions need to hold true for valid results.

2. Non-parametric Tests

These tests make no assumptions about the exact distribution of the population. They are based on either ranks or frequencies.

• Chi-square test – Tests if two categorical variables are related.
• Mann-Whitney U test – Compares medians from two independent groups.
• Wilcoxon signed-rank test – Compares paired observations or repeated measurements.
• Kruskal Wallis test – Compares medians from two or more groups.

Non-parametric tests are distribution-free but less powerful than parametric tests. They can be used when assumptions of parametric tests are violated.

The choice of statistical test depends on the hypotheses, data type and other factors.

One-tailed and Two-tailed Hypothesis Tests

Hypothesis tests can be one-tailed or two-tailed:

• One-tailed test – When H1 specifies a direction. For example: H0: μ = 10 H1: μ > 10 (or μ < 10)
• Two-tailed test – When H1 simply states ≠, not a specific direction. For example: H0: μ = 10 H1: μ ≠ 10

One-tailed tests have greater power to detect an effect in the specified direction. But we need prior knowledge on the direction of effect for using them.

Two-tailed tests do not assume any direction and are more conservative. They are used when we have no clear prior expectation on the directionality.

Interpreting Hypothesis Test Results

Hypothesis testing results can be interpreted based on:

• p-value – Probability of obtaining sample results if H0 is true. Small p-value (< α) indicates significant evidence against H0.
• Confidence intervals – Range of likely values for the population parameter. If it does not contain the H0 value, we reject H0.
• Test statistic – Standardized value computed from sample data. Compared against critical values to determine statistical significance.
• Effect size – Quantifies the magnitude or size of effect. Important for interpreting practical significance.

Hypothesis testing indicates whether an effect exists or not. Measures like effect size and confidence intervals provide additional insights on the observed effect.

Common Errors in Hypothesis Testing

Some common errors to watch out for:

• Having unclear, ambiguous hypotheses.
• Choosing an inappropriate significance level α.
• Using the wrong statistical test for data analysis.
• Interpreting a non-significant result as proof of no effect. Absence of evidence is not evidence of absence.
• Concluding practical significance from statistical significance. Small p-values don’t always imply practical business impact.
• Multiple testing without adjustment leading to elevated Type I errors.
• Stopping data collection prematurely when a significant result is obtained.
• Overlooking effect sizes, confidence intervals while focusing solely on p-values.

Proper application of hypothesis testing methodology minimizes such errors and improves decision making.

Real-world Example of Hypothesis Testing

Let’s take an example of using hypothesis testing in business analytics:

A retailer wants to test if launching a new ecommerce website has resulted in increased online sales.

The retailer gathers weekly sales data before and after the website launch:

H0: Launching the new website did not increase the average weekly online sales

H1: Launching the new website increased the average weekly online sales

Significance level is chosen as 0.05. Appropriate parametric / non-parametric test is selected based on data. Test results show that the p-value is 0.01, which is less than 0.05.

Therefore, we reject the null hypothesis and conclude that the new website launch has resulted in significantly increased online sales at the 5% significance level.

The analyst also computes a 95% confidence interval for the difference in sales before and after website launch. The retailer uses these insights to make data-backed decisions on marketing budget allocation between traditional and digital channels.

Hypothesis testing provides a formal process for making statistical decisions using sample data. It helps assess business metrics against benchmarks, quantify impact of initiatives and compare performance across time periods or segments. By embedding hypothesis testing in analytics, businesses can derive actionable insights for data-driven decision making.

Null Hypothesis Definition and Examples, How to State

What is the null hypothesis, how to state the null hypothesis, null hypothesis overview.

Why is it Called the “Null”?

The word “null” in this context means that it’s a commonly accepted fact that researchers work to nullify . It doesn’t mean that the statement is null (i.e. amounts to nothing) itself! (Perhaps the term should be called the “nullifiable hypothesis” as that might cause less confusion).

Why Do I need to Test it? Why not just prove an alternate one?

The short answer is, as a scientist, you are required to ; It’s part of the scientific process. Science uses a battery of processes to prove or disprove theories, making sure than any new hypothesis has no flaws. Including both a null and an alternate hypothesis is one safeguard to ensure your research isn’t flawed. Not including the null hypothesis in your research is considered very bad practice by the scientific community. If you set out to prove an alternate hypothesis without considering it, you are likely setting yourself up for failure. At a minimum, your experiment will likely not be taken seriously.

• Null hypothesis : H 0 : The world is flat.
• Alternate hypothesis: The world is round.

Several scientists, including Copernicus , set out to disprove the null hypothesis. This eventually led to the rejection of the null and the acceptance of the alternate. Most people accepted it — the ones that didn’t created the Flat Earth Society !. What would have happened if Copernicus had not disproved the it and merely proved the alternate? No one would have listened to him. In order to change people’s thinking, he first had to prove that their thinking was wrong .

How to State the Null Hypothesis from a Word Problem

You’ll be asked to convert a word problem into a hypothesis statement in statistics that will include a null hypothesis and an alternate hypothesis . Breaking your problem into a few small steps makes these problems much easier to handle.

Step 2: Convert the hypothesis to math . Remember that the average is sometimes written as μ.

H 1 : μ > 8.2

Broken down into (somewhat) English, that’s H 1 (The hypothesis): μ (the average) > (is greater than) 8.2

Step 3: State what will happen if the hypothesis doesn’t come true. If the recovery time isn’t greater than 8.2 weeks, there are only two possibilities, that the recovery time is equal to 8.2 weeks or less than 8.2 weeks.

H 0 : μ ≤ 8.2

Broken down again into English, that’s H 0 (The null hypothesis): μ (the average) ≤ (is less than or equal to) 8.2

How to State the Null Hypothesis: Part Two

But what if the researcher doesn’t have any idea what will happen.

Example Problem: A researcher is studying the effects of radical exercise program on knee surgery patients. There is a good chance the therapy will improve recovery time, but there’s also the possibility it will make it worse. Average recovery times for knee surgery patients is 8.2 weeks. 

Step 1: State what will happen if the experiment doesn’t make any difference. That’s the null hypothesis–that nothing will happen. In this experiment, if nothing happens, then the recovery time will stay at 8.2 weeks.

H 0 : μ = 8.2

Broken down into English, that’s H 0 (The null hypothesis): μ (the average) = (is equal to) 8.2

Step 2: Figure out the alternate hypothesis . The alternate hypothesis is the opposite of the null hypothesis. In other words, what happens if our experiment makes a difference?

H 1 : μ ≠ 8.2

In English again, that’s H 1 (The  alternate hypothesis): μ (the average) ≠ (is not equal to) 8.2

That’s How to State the Null Hypothesis!

Check out our Youtube channel for more stats tips!

Gonick, L. (1993). The Cartoon Guide to Statistics . HarperPerennial. Kotz, S.; et al., eds. (2006), Encyclopedia of Statistical Sciences , Wiley.

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• Null and Alternative Hypotheses | Definitions & Examples

Null and Alternative Hypotheses | Definitions & Examples

Published on 5 October 2022 by Shaun Turney . Revised on 6 December 2022.

The null and alternative hypotheses are two competing claims that researchers weigh evidence for and against using a statistical test :

• Null hypothesis (H 0 ): There’s no effect in the population .
• Alternative hypothesis (H A ): There’s an effect in the population.

The effect is usually the effect of the independent variable on the dependent variable .

Table of contents

Answering your research question with hypotheses, what is a null hypothesis, what is an alternative hypothesis, differences between null and alternative hypotheses, how to write null and alternative hypotheses, frequently asked questions about null and alternative hypotheses.

The null and alternative hypotheses offer competing answers to your research question . When the research question asks “Does the independent variable affect the dependent variable?”, the null hypothesis (H 0 ) answers “No, there’s no effect in the population.” On the other hand, the alternative hypothesis (H A ) answers “Yes, there is an effect in the population.”

The null and alternative are always claims about the population. That’s because the goal of hypothesis testing is to make inferences about a population based on a sample . Often, we infer whether there’s an effect in the population by looking at differences between groups or relationships between variables in the sample.

You can use a statistical test to decide whether the evidence favors the null or alternative hypothesis. Each type of statistical test comes with a specific way of phrasing the null and alternative hypothesis. However, the hypotheses can also be phrased in a general way that applies to any test.

The null hypothesis is the claim that there’s no effect in the population.

If the sample provides enough evidence against the claim that there’s no effect in the population ( p ≤ α), then we can reject the null hypothesis . Otherwise, we fail to reject the null hypothesis.

Although “fail to reject” may sound awkward, it’s the only wording that statisticians accept. Be careful not to say you “prove” or “accept” the null hypothesis.

Null hypotheses often include phrases such as “no effect”, “no difference”, or “no relationship”. When written in mathematical terms, they always include an equality (usually =, but sometimes ≥ or ≤).

Examples of null hypotheses

The table below gives examples of research questions and null hypotheses. There’s always more than one way to answer a research question, but these null hypotheses can help you get started.

*Note that some researchers prefer to always write the null hypothesis in terms of “no effect” and “=”. It would be fine to say that daily meditation has no effect on the incidence of depression and p 1 = p 2 .

The alternative hypothesis (H A ) is the other answer to your research question . It claims that there’s an effect in the population.

Often, your alternative hypothesis is the same as your research hypothesis. In other words, it’s the claim that you expect or hope will be true.

The alternative hypothesis is the complement to the null hypothesis. Null and alternative hypotheses are exhaustive, meaning that together they cover every possible outcome. They are also mutually exclusive, meaning that only one can be true at a time.

Alternative hypotheses often include phrases such as “an effect”, “a difference”, or “a relationship”. When alternative hypotheses are written in mathematical terms, they always include an inequality (usually ≠, but sometimes > or <). As with null hypotheses, there are many acceptable ways to phrase an alternative hypothesis.

Examples of alternative hypotheses

The table below gives examples of research questions and alternative hypotheses to help you get started with formulating your own.

Null and alternative hypotheses are similar in some ways:

• They’re both answers to the research question
• They both make claims about the population
• They’re both evaluated by statistical tests.

However, there are important differences between the two types of hypotheses, summarized in the following table.

To help you write your hypotheses, you can use the template sentences below. If you know which statistical test you’re going to use, you can use the test-specific template sentences. Otherwise, you can use the general template sentences.

The only thing you need to know to use these general template sentences are your dependent and independent variables. To write your research question, null hypothesis, and alternative hypothesis, fill in the following sentences with your variables:

Does independent variable affect dependent variable ?

• Null hypothesis (H 0 ): Independent variable does not affect dependent variable .
• Alternative hypothesis (H A ): Independent variable affects dependent variable .

Test-specific

Once you know the statistical test you’ll be using, you can write your hypotheses in a more precise and mathematical way specific to the test you chose. The table below provides template sentences for common statistical tests.

Note: The template sentences above assume that you’re performing one-tailed tests . One-tailed tests are appropriate for most studies.

The null hypothesis is often abbreviated as H 0 . When the null hypothesis is written using mathematical symbols, it always includes an equality symbol (usually =, but sometimes ≥ or ≤).

The alternative hypothesis is often abbreviated as H a or H 1 . When the alternative hypothesis is written using mathematical symbols, it always includes an inequality symbol (usually ≠, but sometimes < or >).

A research hypothesis is your proposed answer to your research question. The research hypothesis usually includes an explanation (‘ x affects y because …’).

A statistical hypothesis, on the other hand, is a mathematical statement about a population parameter. Statistical hypotheses always come in pairs: the null and alternative hypotheses. In a well-designed study , the statistical hypotheses correspond logically to the research hypothesis.

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Hypothesis Testing: Null Hypothesis and Alternative Hypothesis

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Figuring out exactly what the null hypothesis and the alternative hypotheses are is not a walk in the park. Hypothesis testing is based on the knowledge that you can acquire by going over what we have previously covered about statistics in our blog.

So, if you don’t want to have a hard time keeping up, make sure you have read all the tutorials about confidence intervals , distributions , z-tables and t-tables .

We've also made a video on null hypothesis vs alternative hypothesis - you can watch it below or just scroll down if you prefer reading.

Confidence intervals provide us with an estimation of where the parameters are located. You can obtain them with our confidence interval calculator and learn more about them in the related article.

However, when we are making a decision, we need a yes or no answer. The correct approach, in this case, is to use a test .

Here we will start learning about one of the fundamental tasks in statistics - hypothesis testing !

The Hypothesis Testing Process

  First off, let’s talk about data-driven decision-making. It consists of the following steps:

• First, we must formulate a hypothesis .
• After doing that, we have to find the right test for our hypothesis .
• Then, we execute the test.
• Finally, we make a decision based on the result.

Let’s start from the beginning.

What is a Hypothesis?

Though there are many ways to define it, the most intuitive must be:

“A hypothesis is an idea that can be tested.”

This is not the formal definition, but it explains the point very well.

So, if we say that apples in New York are expensive, this is an idea or a statement. However, it is not testable, until we have something to compare it with.

For instance, if we define expensive as: any price higher than $1.75 dollars per pound, then it immediately becomes a hypothesis .

What Cannot Be a Hypothesis?

An example may be: would the USA do better or worse under a Clinton administration, compared to a Trump administration? Statistically speaking, this is an idea , but there is no data to test it. Therefore, it cannot be a hypothesis of a statistical test.

Actually, it is more likely to be a topic of another discipline.

Conversely, in statistics, we may compare different US presidencies that have already been completed. For example, the Obama administration and the Bush administration, as we have data on both.

A Two-Sided Test

Alright, let’s get out of politics and get into hypotheses . Here’s a simple topic that CAN be tested.

According to Glassdoor (the popular salary information website), the mean data scientist salary in the US is 113,000 dollars.

So, we want to test if their estimate is correct.

The Null and Alternative Hypotheses

There are two hypotheses that are made: the null hypothesis , denoted H 0 , and the alternative hypothesis , denoted H 1 or H A .

The null hypothesis is the one to be tested and the alternative is everything else. In our example:

The null hypothesis would be: The mean data scientist salary is 113,000 dollars.

While the alternative : The mean data scientist salary is not 113,000 dollars.

Author's note: If you're interested in a data scientist career, check out our articles Data Scientist Career Path , 5 Business Basics for Data Scientists , Data Science Interview Questions , and 15 Data Science Consulting Companies Hiring Now .

An Example of a One-Sided Test

You can also form one-sided or one-tailed tests.

Say your friend, Paul, told you that he thinks data scientists earn more than 125,000 dollars per year. You doubt him, so you design a test to see who’s right.

The null hypothesis of this test would be: The mean data scientist salary is more than 125,000 dollars.

The alternative will cover everything else, thus: The mean data scientist salary is less than or equal to 125,000 dollars.

Important: The outcomes of tests refer to the population parameter rather than the sample statistic! So, the result that we get is for the population.

Important: Another crucial consideration is that, generally, the researcher is trying to reject the null hypothesis . Think about the null hypothesis as the status quo and the alternative as the change or innovation that challenges that status quo. In our example, Paul was representing the status quo, which we were challenging.

Let’s go over it once more. In statistics, the null hypothesis is the statement we are trying to reject. Therefore, the null hypothesis is the present state of affairs, while the alternative is our personal opinion.

Why Hypothesis Testing Works

Right now, you may be feeling a little puzzled. This is normal because this whole concept is counter-intuitive at the beginning. However, there is an extremely easy way to continue your journey of exploring it. By diving into the linked tutorial, you will find out why hypothesis testing actually works.

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Null Hypothesis - Explained

What is the null hypothesis.

A null hypothesis refers to a kind of statistical hypothesis that signifies the absence of statistical significance for a group of specific observations. It showcases that there is not any variation involved between variables. Or, it can state that one variable is similar to its mean. It is considered to be accurate until an alternative hypothesis proves it wrong. For instance, in case, the hypothesis test is conducted in such a manner that the alternative hypothesis showcases a difference between the population parameter and the claimed amount. Hence, the population means cook time is not equivalent to 12 minutes. Instead, it tends to be different, either more or less than the given value. In case, the null hypothesis is true, or the hypothesis test says that the population mean tends to be 12 minutes, then it will automatically lead to the elimination of the alternative hypothesis, and vice-versa. 

Key Points to Remember

How is the null hypothesis used , examples of setting up a null hypothesis.

Lets take this example. As per a college principal, the students secured 7/10 marks on an average in tests. For this hypothesis test, we took a sample size of 30 students from the total population of 300 students in the school. We ascertained the sample mean, and compared the calculated mean with the population mean, and then take decision about the hypothesis. In another example, a specific mutual fund offers an annual rate of return of 8%. Lets say that this mutual fund has been operating for a period of 20 years. We took a random sample of mutual funds returns received per year for 5 years, and then determine its average or mean. The next step is to strike a comparison with the sample mean calculated for 5 years, and the population mean for coming to a conclusion. Generally, the reported number is referred to as the hypothesis, and assumed to be right. For the aforementioned instances, hypothesis will be:

The above two statements which form the null hypothesis are assumed to be correct. It is similar to the court proceedings where an accused is presumed to be non-guilty until the other party presents evidence against him, and proves him guilty. Similarly, the first stage of hypothesis testing is to create a null hypothesis, and determine if this presumption is right or wrong. The null hypothesis is tested for ensuring its validity and reliability. Any data that is in contrast to the null hypothesis is stored in alternate hypothesis. Hence, the alternate hypothesis for the above two instances would be:

Therefore, it is right to say that the alternate hypothesis is exactly the opposite of the null hypothesis.

Hypothesis Testing for Investments

Related articles.

9.4 Full Hypothesis Test Examples

Tests on means, example 9.8.

Jeffrey, as an eight-year old, established a mean time of 16.43 seconds for swimming the 25-yard freestyle, with a standard deviation of 0.8 seconds . His dad, Frank, thought that Jeffrey could swim the 25-yard freestyle faster using goggles. Frank bought Jeffrey a new pair of expensive goggles and timed Jeffrey for 15 25-yard freestyle swims . For the 15 swims, Jeffrey's mean time was 16 seconds. Frank thought that the goggles helped Jeffrey to swim faster than the 16.43 seconds. Conduct a hypothesis test using a preset α = 0.05.

Set up the Hypothesis Test:

Since the problem is about a mean, this is a test of a single population mean .

Set the null and alternative hypothesis:

In this case there is an implied challenge or claim. This is that the goggles will reduce the swimming time. The effect of this is to set the hypothesis as a one-tailed test. The claim will always be in the alternative hypothesis because the burden of proof always lies with the alternative. Remember that the status quo must be defeated with a high degree of confidence, in this case 95 % confidence. The null and alternative hypotheses are thus:

H 0 : μ ≥ 16.43   H a : μ < 16.43

For Jeffrey to swim faster, his time will be less than 16.43 seconds. The "<" tells you this is left-tailed.

Determine the distribution needed:

Random variable: X ¯ X ¯ = the mean time to swim the 25-yard freestyle.

Distribution for the test statistic:

The sample size is less than 30 and we do not know the population standard deviation so this is a t-test. and the proper formula is: t c = X ¯ - μ 0 σ / n t c = X ¯ - μ 0 σ / n

μ 0 = 16.43 comes from H 0 and not the data. X ¯ X ¯ = 16. s = 0.8, and n = 15.

Our step 2, setting the level of significance, has already been determined by the problem, .05 for a 95 % significance level. It is worth thinking about the meaning of this choice. The Type I error is to conclude that Jeffrey swims the 25-yard freestyle, on average, in less than 16.43 seconds when, in fact, he actually swims the 25-yard freestyle, on average, in 16.43 seconds. (Reject the null hypothesis when the null hypothesis is true.) For this case the only concern with a Type I error would seem to be that Jeffery’s dad may fail to bet on his son’s victory because he does not have appropriate confidence in the effect of the goggles.

To find the critical value we need to select the appropriate test statistic. We have concluded that this is a t-test on the basis of the sample size and that we are interested in a population mean. We can now draw the graph of the t-distribution and mark the critical value. For this problem the degrees of freedom are n-1, or 14. Looking up 14 degrees of freedom at the 0.05 column of the t-table we find 1.761. This is the critical value and we can put this on our graph.

Step 3 is the calculation of the test statistic using the formula we have selected. We find that the calculated test statistic is 2.08, meaning that the sample mean is 2.08 standard deviations away from the hypothesized mean of 16.43.

Step 4 has us compare the test statistic and the critical value and mark these on the graph. We see that the test statistic is in the tail and thus we move to step 4 and reach a conclusion. The probability that an average time of 16 minutes could come from a distribution with a population mean of 16.43 minutes is too unlikely for us to accept the null hypothesis. We cannot accept the null.

Step 5 has us state our conclusions first formally and then less formally. A formal conclusion would be stated as: “With a 95% level of significance we cannot accept the null hypothesis that the swimming time with goggles comes from a distribution with a population mean time of 16.43 minutes.” Less formally, “With 95% significance we believe that the goggles improves swimming speed”

If we wished to use the p-value system of reaching a conclusion we would calculate the statistic and take the additional step to find the probability of being 2.08 standard deviations from the mean on a t-distribution. This value is .0187. Comparing this to the α-level of .05 we see that we cannot accept the null. The p-value has been put on the graph as the shaded area beyond -2.08 and it shows that it is smaller than the hatched area which is the alpha level of 0.05. Both methods reach the same conclusion that we cannot accept the null hypothesis.

The mean throwing distance of a football for Marco, a high school freshman quarterback, is 40 yards, with a standard deviation of two yards. The team coach tells Marco to adjust his grip to get more distance. The coach records the distances for 20 throws. For the 20 throws, Marco’s mean distance was 45 yards. The coach thought the different grip helped Marco throw farther than 40 yards. Conduct a hypothesis test using a preset α = 0.05. Assume the throw distances for footballs are normal.

First, determine what type of test this is, set up the hypothesis test, find the p -value, sketch the graph, and state your conclusion.

Example 9.9

Jane has just begun her new job as on the sales force of a very competitive company. In a sample of 16 sales calls it was found that she closed the contract for an average value of 108 dollars with a standard deviation of 12 dollars. Test at 5% significance that the population mean is at least 100 dollars against the alternative that it is less than 100 dollars. Company policy requires that new members of the sales force must exceed an average of $100 per contract during the trial employment period. Can we conclude that Jane has met this requirement at the significance level of 95%?

• H 0 : µ ≤ 100 H a : µ > 100 The null and alternative hypothesis are for the parameter µ because the number of dollars of the contracts is a continuous random variable. Also, this is a one-tailed test because the company has only an interested if the number of dollars per contact is below a particular number not "too high" a number. This can be thought of as making a claim that the requirement is being met and thus the claim is in the alternative hypothesis.
• Test statistic: t c = x ¯ − µ 0 s n = 108 − 100 ( 12 16 ) = 2.67 t c = x ¯ − µ 0 s n = 108 − 100 ( 12 16 ) = 2.67
• Critical value: t a = 1.753 t a = 1.753 with n-1 degrees of freedom= 15

The test statistic is a Student's t because the sample size is below 30; therefore, we cannot use the normal distribution. Comparing the calculated value of the test statistic and the critical value of t t ( t a ) ( t a ) at a 5% significance level, we see that the calculated value is in the tail of the distribution. Thus, we conclude that 108 dollars per contract is significantly larger than the hypothesized value of 100 and thus we cannot accept the null hypothesis. There is evidence that supports Jane's performance meets company standards.

It is believed that a stock price for a particular company will grow at a rate of $5 per week with a standard deviation of $1. An investor believes the stock won’t grow as quickly. The changes in stock price is recorded for ten weeks and are as follows: $4, $3, $2, $3, $1, $7, $2, $1, $1, $2. Perform a hypothesis test using a 5% level of significance. State the null and alternative hypotheses, state your conclusion, and identify the Type I errors.

Example 9.10

A manufacturer of salad dressings uses machines to dispense liquid ingredients into bottles that move along a filling line. The machine that dispenses salad dressings is working properly when 8 ounces are dispensed. Suppose that the average amount dispensed in a particular sample of 35 bottles is 7.91 ounces with a variance of 0.03 ounces squared, s 2 s 2 . Is there evidence that the machine should be stopped and production wait for repairs? The lost production from a shutdown is potentially so great that management feels that the level of significance in the analysis should be 99%.

Again we will follow the steps in our analysis of this problem.

STEP 1 : Set the Null and Alternative Hypothesis. The random variable is the quantity of fluid placed in the bottles. This is a continuous random variable and the parameter we are interested in is the mean. Our hypothesis therefore is about the mean. In this case we are concerned that the machine is not filling properly. From what we are told it does not matter if the machine is over-filling or under-filling, both seem to be an equally bad error. This tells us that this is a two-tailed test: if the machine is malfunctioning it will be shutdown regardless if it is from over-filling or under-filling. The null and alternative hypotheses are thus:

STEP 2 : Decide the level of significance and draw the graph showing the critical value.

This problem has already set the level of significance at 99%. The decision seems an appropriate one and shows the thought process when setting the significance level. Management wants to be very certain, as certain as probability will allow, that they are not shutting down a machine that is not in need of repair. To draw the distribution and the critical value, we need to know which distribution to use. Because this is a continuous random variable and we are interested in the mean, and the sample size is greater than 30, the appropriate distribution is the normal distribution and the relevant critical value is 2.575 from the normal table or the t-table at 0.005 column and infinite degrees of freedom. We draw the graph and mark these points.

STEP 3 : Calculate sample parameters and the test statistic. The sample parameters are provided, the sample mean is 7.91 and the sample variance is .03 and the sample size is 35. We need to note that the sample variance was provided not the sample standard deviation, which is what we need for the formula. Remembering that the standard deviation is simply the square root of the variance, we therefore know the sample standard deviation, s, is 0.173. With this information we calculate the test statistic as -3.07, and mark it on the graph.

STEP 4 : Compare test statistic and the critical values Now we compare the test statistic and the critical value by placing the test statistic on the graph. We see that the test statistic is in the tail, decidedly greater than the critical value of 2.575. We note that even the very small difference between the hypothesized value and the sample value is still a large number of standard deviations. The sample mean is only 0.08 ounces different from the required level of 8 ounces, but it is 3 plus standard deviations away and thus we cannot accept the null hypothesis.

STEP 5 : Reach a Conclusion

Three standard deviations of a test statistic will guarantee that the test will fail. The probability that anything is within three standard deviations is almost zero. Actually it is 0.0026 on the normal distribution, which is certainly almost zero in a practical sense. Our formal conclusion would be “ At a 99% level of significance we cannot accept the hypothesis that the sample mean came from a distribution with a mean of 8 ounces” Or less formally, and getting to the point, “At a 99% level of significance we conclude that the machine is under filling the bottles and is in need of repair”.

Hypothesis Test for Proportions

Just as there were confidence intervals for proportions, or more formally, the population parameter p of the binomial distribution, there is the ability to test hypotheses concerning p .

The population parameter for the binomial is p . The estimated value (point estimate) for p is p′ where p′ = x/n , x is the number of successes in the sample and n is the sample size.

When you perform a hypothesis test of a population proportion p , you take a simple random sample from the population. The conditions for a binomial distribution must be met, which are: there are a certain number n of independent trials meaning random sampling, the outcomes of any trial are binary, success or failure, and each trial has the same probability of a success p . The shape of the binomial distribution needs to be similar to the shape of the normal distribution. To ensure this, the quantities np′ and nq′ must both be greater than five ( np′ > 5 and nq′ > 5). In this case the binomial distribution of a sample (estimated) proportion can be approximated by the normal distribution with μ = np μ = np and σ = npq σ = npq . Remember that q = 1 – p q = 1 – p . There is no distribution that can correct for this small sample bias and thus if these conditions are not met we simply cannot test the hypothesis with the data available at that time. We met this condition when we first were estimating confidence intervals for p .

Again, we begin with the standardizing formula modified because this is the distribution of a binomial.

Substituting p 0 p 0 , the hypothesized value of p , we have:

This is the test statistic for testing hypothesized values of p , where the null and alternative hypotheses take one of the following forms:

The decision rule stated above applies here also: if the calculated value of Z c shows that the sample proportion is "too many" standard deviations from the hypothesized proportion, the null hypothesis cannot be accepted. The decision as to what is "too many" is pre-determined by the analyst depending on the level of significance required in the test.

Example 9.11

The mortgage department of a large bank is interested in the nature of loans of first-time borrowers. This information will be used to tailor their marketing strategy. They believe that 50% of first-time borrowers take out smaller loans than other borrowers. They perform a hypothesis test to determine if the percentage is the same or different from 50% . They sample 100 first-time borrowers and find 53 of these loans are smaller that the other borrowers. For the hypothesis test, they choose a 5% level of significance.

STEP 1 : Set the null and alternative hypothesis.

H 0 : p = 0.50   H a : p ≠ 0.50

The words "is the same or different from" tell you this is a two-tailed test. The Type I and Type II errors are as follows: The Type I error is to conclude that the proportion of borrowers is different from 50% when, in fact, the proportion is actually 50%. (Reject the null hypothesis when the null hypothesis is true). The Type II error is there is not enough evidence to conclude that the proportion of first time borrowers differs from 50% when, in fact, the proportion does differ from 50%. (You fail to reject the null hypothesis when the null hypothesis is false.)

STEP 2 : Decide the level of significance and draw the graph showing the critical value

The level of significance has been set by the problem at the 95% level. Because this is two-tailed test one-half of the alpha value will be in the upper tail and one-half in the lower tail as shown on the graph. The critical value for the normal distribution at the 95% level of confidence is 1.96. This can easily be found on the student’s t-table at the very bottom at infinite degrees of freedom remembering that at infinity the t-distribution is the normal distribution. Of course the value can also be found on the normal table but you have go looking for one-half of 95 (0.475) inside the body of the table and then read out to the sides and top for the number of standard deviations.

STEP 3 : Calculate the sample parameters and critical value of the test statistic.

The test statistic is a normal distribution, Z, for testing proportions and is:

For this case, the sample of 100 found 53 first-time borrowers were different from other borrowers. The sample proportion, p′ = 53/100= 0.53 The test question, therefore, is : “Is 0.53 significantly different from .50?” Putting these values into the formula for the test statistic we find that 0.53 is only 0.60 standard deviations away from .50. This is barely off of the mean of the standard normal distribution of zero. There is virtually no difference from the sample proportion and the hypothesized proportion in terms of standard deviations.

STEP 4 : Compare the test statistic and the critical value.

The calculated value is well within the critical values of ± 1.96 standard deviations and thus we cannot reject the null hypothesis. To reject the null hypothesis we need significant evident of difference between the hypothesized value and the sample value. In this case the sample value is very nearly the same as the hypothesized value measured in terms of standard deviations.

STEP 5 : Reach a conclusion

The formal conclusion would be “At a 95% level of significance we cannot reject the null hypothesis that 50% of first-time borrowers have the same size loans as other borrowers”. Less formally we would say that “There is no evidence that one-half of first-time borrowers are significantly different in loan size from other borrowers”. Notice the length to which the conclusion goes to include all of the conditions that are attached to the conclusion. Statisticians for all the criticism they receive, are careful to be very specific even when this seems trivial. Statisticians cannot say more than they know and the data constrain the conclusion to be within the metes and bounds of the data.

Try It 9.11

A teacher believes that 85% of students in the class will want to go on a field trip to the local zoo. She performs a hypothesis test to determine if the percentage is the same or different from 85%. The teacher samples 50 students and 39 reply that they would want to go to the zoo. For the hypothesis test, use a 1% level of significance.

Example 9.12

Suppose a consumer group suspects that the proportion of households that have three or more cell phones is 30%. A cell phone company has reason to believe that the proportion is not 30%. Before they start a big advertising campaign, they conduct a hypothesis test. Their marketing people survey 150 households with the result that 43 of the households have three or more cell phones.

Here is an abbreviate version of the system to solve hypothesis tests applied to a test on a proportions.

Example 9.13

The National Institute of Standards and Technology provides exact data on conductivity properties of materials. Following are conductivity measurements for 11 randomly selected pieces of a particular type of glass.

1.11; 1.07; 1.11; 1.07; 1.12; 1.08; .98; .98 1.02; .95; .95 Is there convincing evidence that the average conductivity of this type of glass is greater than one? Use a significance level of 0.05.

Let’s follow a four-step process to answer this statistical question.

• H 0 : μ ≤ 1
• H a : μ > 1
• Plan : We are testing a sample mean without a known population standard deviation with less than 30 observations. Therefore, we need to use a Student's-t distribution. Assume the underlying population is normal.
• Do the calculations and draw the graph .
• State the Conclusions : We cannot accept the null hypothesis. It is reasonable to state that the data supports the claim that the average conductivity level is greater than one.

Example 9.14

In a study of 420,019 cell phone users, 172 of the subjects developed brain cancer. Test the claim that cell phone users developed brain cancer at a greater rate than that for non-cell phone users (the rate of brain cancer for non-cell phone users is 0.0340%). Since this is a critical issue, use a 0.005 significance level. Explain why the significance level should be so low in terms of a Type I error.

• H 0 : p ≤ 0.00034
• H a : p > 0.00034

If we commit a Type I error, we are essentially accepting a false claim. Since the claim describes cancer-causing environments, we want to minimize the chances of incorrectly identifying causes of cancer.

• We will be testing a sample proportion with x = 172 and n = 420,019. The sample is sufficiently large because we have np' = 420,019(0.00034) = 142.8, nq' = 420,019(0.99966) = 419,876.2, two independent outcomes, and a fixed probability of success p' = 0.00034. Thus we will be able to generalize our results to the population.

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Want to cite, share, or modify this book? This book uses the Creative Commons Attribution License and you must attribute OpenStax.

Access for free at https://openstax.org/books/introductory-business-statistics/pages/1-introduction

• Authors: Alexander Holmes, Barbara Illowsky, Susan Dean
• Publisher/website: OpenStax
• Book title: Introductory Business Statistics
• Publication date: Nov 29, 2017
• Location: Houston, Texas
• Book URL: https://openstax.org/books/introductory-business-statistics/pages/1-introduction
• Section URL: https://openstax.org/books/introductory-business-statistics/pages/9-4-full-hypothesis-test-examples

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Writing Null Hypotheses in Research and Statistics

Last Updated: January 17, 2024 Fact Checked

This article was co-authored by Joseph Quinones and by wikiHow staff writer, Jennifer Mueller, JD . Joseph Quinones is a High School Physics Teacher working at South Bronx Community Charter High School. Joseph specializes in astronomy and astrophysics and is interested in science education and science outreach, currently practicing ways to make physics accessible to more students with the goal of bringing more students of color into the STEM fields. He has experience working on Astrophysics research projects at the Museum of Natural History (AMNH). Joseph recieved his Bachelor's degree in Physics from Lehman College and his Masters in Physics Education from City College of New York (CCNY). He is also a member of a network called New York City Men Teach. There are 7 references cited in this article, which can be found at the bottom of the page. This article has been fact-checked, ensuring the accuracy of any cited facts and confirming the authority of its sources. This article has been viewed 28,749 times.

Are you working on a research project and struggling with how to write a null hypothesis? Well, you've come to the right place! Start by recognizing that the basic definition of "null" is "none" or "zero"—that's your biggest clue as to what a null hypothesis should say. Keep reading to learn everything you need to know about the null hypothesis, including how it relates to your research question and your alternative hypothesis as well as how to use it in different types of studies.

Things You Should Know

• Write a research null hypothesis as a statement that the studied variables have no relationship to each other, or that there's no difference between 2 groups.

• Adjust the format of your null hypothesis to match the statistical method you used to test it, such as using "mean" if you're comparing the mean between 2 groups.

What is a null hypothesis?

• Research hypothesis: States in plain language that there's no relationship between the 2 variables or there's no difference between the 2 groups being studied.
• Statistical hypothesis: States the predicted outcome of statistical analysis through a mathematical equation related to the statistical method you're using.

Examples of Null Hypotheses

Null Hypothesis vs. Alternative Hypothesis

• For example, your alternative hypothesis could state a positive correlation between 2 variables while your null hypothesis states there's no relationship. If there's a negative correlation, then both hypotheses are false.

• You need additional data or evidence to show that your alternative hypothesis is correct—proving the null hypothesis false is just the first step.
• In smaller studies, sometimes it's enough to show that there's some relationship and your hypothesis could be correct—you can leave the additional proof as an open question for other researchers to tackle.

How do I test a null hypothesis?

• Group means: Compare the mean of the variable in your sample with the mean of the variable in the general population. [6] X Research source
• Group proportions: Compare the proportion of the variable in your sample with the proportion of the variable in the general population. [7] X Research source
• Correlation: Correlation analysis looks at the relationship between 2 variables—specifically, whether they tend to happen together. [8] X Research source
• Regression: Regression analysis reveals the correlation between 2 variables while also controlling for the effect of other, interrelated variables. [9] X Research source

Templates for Null Hypotheses

• Research null hypothesis: There is no difference in the mean [dependent variable] between [group 1] and [group 2].

• Research null hypothesis: The proportion of [dependent variable] in [group 1] and [group 2] is the same.

• Research null hypothesis: There is no correlation between [independent variable] and [dependent variable] in the population.

• Research null hypothesis: There is no relationship between [independent variable] and [dependent variable] in the population.

Expert Q&A

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Expert Interview

Thanks for reading our article! If you’d like to learn more about physics, check out our in-depth interview with Joseph Quinones .

• ↑ https://online.stat.psu.edu/stat100/lesson/10/10.1
• ↑ https://online.stat.psu.edu/stat501/lesson/2/2.12
• ↑ https://support.minitab.com/en-us/minitab/21/help-and-how-to/statistics/basic-statistics/supporting-topics/basics/null-and-alternative-hypotheses/
• ↑ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5635437/
• ↑ https://online.stat.psu.edu/statprogram/reviews/statistical-concepts/hypothesis-testing
• ↑ https://education.arcus.chop.edu/null-hypothesis-testing/
• ↑ https://sphweb.bumc.bu.edu/otlt/mph-modules/bs/bs704_hypothesistest-means-proportions/bs704_hypothesistest-means-proportions_print.html

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Keyboard Shortcuts

10.1 - setting the hypotheses: examples.

A significance test examines whether the null hypothesis provides a plausible explanation of the data. The null hypothesis itself does not involve the data. It is a statement about a parameter (a numerical characteristic of the population). These population values might be proportions or means or differences between means or proportions or correlations or odds ratios or any other numerical summary of the population. The alternative hypothesis is typically the research hypothesis of interest. Here are some examples.

Example 10.2: Hypotheses with One Sample of One Categorical Variable Section  

About 10% of the human population is left-handed. Suppose a researcher at Penn State speculates that students in the College of Arts and Architecture are more likely to be left-handed than people found in the general population. We only have one sample since we will be comparing a population proportion based on a sample value to a known population value.

• Research Question : Are artists more likely to be left-handed than people found in the general population?
• Response Variable : Classification of the student as either right-handed or left-handed

State Null and Alternative Hypotheses

• Null Hypothesis : Students in the College of Arts and Architecture are no more likely to be left-handed than people in the general population (population percent of left-handed students in the College of Art and Architecture = 10% or p = .10).
• Alternative Hypothesis : Students in the College of Arts and Architecture are more likely to be left-handed than people in the general population (population percent of left-handed students in the College of Arts and Architecture > 10% or p > .10). This is a one-sided alternative hypothesis.

Example 10.3: Hypotheses with One Sample of One Measurement Variable Section  

A generic brand of the anti-histamine Diphenhydramine markets a capsule with a 50 milligram dose. The manufacturer is worried that the machine that fills the capsules has come out of calibration and is no longer creating capsules with the appropriate dosage.

• Research Question : Does the data suggest that the population mean dosage of this brand is different than 50 mg?
• Response Variable : dosage of the active ingredient found by a chemical assay.
• Null Hypothesis : On the average, the dosage sold under this brand is 50 mg (population mean dosage = 50 mg).
• Alternative Hypothesis : On the average, the dosage sold under this brand is not 50 mg (population mean dosage ≠ 50 mg). This is a two-sided alternative hypothesis.

Example 10.4: Hypotheses with Two Samples of One Categorical Variable Section  

Many people are starting to prefer vegetarian meals on a regular basis. Specifically, a researcher believes that females are more likely than males to eat vegetarian meals on a regular basis.

• Research Question : Does the data suggest that females are more likely than males to eat vegetarian meals on a regular basis?
• Response Variable : Classification of whether or not a person eats vegetarian meals on a regular basis
• Explanatory (Grouping) Variable: Sex
• Null Hypothesis : There is no sex effect regarding those who eat vegetarian meals on a regular basis (population percent of females who eat vegetarian meals on a regular basis = population percent of males who eat vegetarian meals on a regular basis or p females = p males ).
• Alternative Hypothesis : Females are more likely than males to eat vegetarian meals on a regular basis (population percent of females who eat vegetarian meals on a regular basis > population percent of males who eat vegetarian meals on a regular basis or p females > p males ). This is a one-sided alternative hypothesis.

Example 10.5: Hypotheses with Two Samples of One Measurement Variable Section  

Obesity is a major health problem today. Research is starting to show that people may be able to lose more weight on a low carbohydrate diet than on a low fat diet.

• Research Question : Does the data suggest that, on the average, people are able to lose more weight on a low carbohydrate diet than on a low fat diet?
• Response Variable : Weight loss (pounds)
• Explanatory (Grouping) Variable : Type of diet
• Null Hypothesis : There is no difference in the mean amount of weight loss when comparing a low carbohydrate diet with a low fat diet (population mean weight loss on a low carbohydrate diet = population mean weight loss on a low fat diet).
• Alternative Hypothesis : The mean weight loss should be greater for those on a low carbohydrate diet when compared with those on a low fat diet (population mean weight loss on a low carbohydrate diet > population mean weight loss on a low fat diet). This is a one-sided alternative hypothesis.

Example 10.6: Hypotheses about the relationship between Two Categorical Variables Section  

• Research Question : Do the odds of having a stroke increase if you inhale second hand smoke ? A case-control study of non-smoking stroke patients and controls of the same age and occupation are asked if someone in their household smokes.
• Variables : There are two different categorical variables (Stroke patient vs control and whether the subject lives in the same household as a smoker). Living with a smoker (or not) is the natural explanatory variable and having a stroke (or not) is the natural response variable in this situation.
• Null Hypothesis : There is no relationship between whether or not a person has a stroke and whether or not a person lives with a smoker (odds ratio between stroke and second-hand smoke situation is = 1).
• Alternative Hypothesis : There is a relationship between whether or not a person has a stroke and whether or not a person lives with a smoker (odds ratio between stroke and second-hand smoke situation is > 1). This is a one-tailed alternative.

This research question might also be addressed like example 11.4 by making the hypotheses about comparing the proportion of stroke patients that live with smokers to the proportion of controls that live with smokers.

Example 10.7: Hypotheses about the relationship between Two Measurement Variables Section  

• Research Question : A financial analyst believes there might be a positive association between the change in a stock's price and the amount of the stock purchased by non-management employees the previous day (stock trading by management being under "insider-trading" regulatory restrictions).
• Variables : Daily price change information (the response variable) and previous day stock purchases by non-management employees (explanatory variable). These are two different measurement variables.
• Null Hypothesis : The correlation between the daily stock price change (\$) and the daily stock purchases by non-management employees (\$) = 0.
• Alternative Hypothesis : The correlation between the daily stock price change (\$) and the daily stock purchases by non-management employees (\$) > 0. This is a one-sided alternative hypothesis.

Example 10.8: Hypotheses about comparing the relationship between Two Measurement Variables in Two Samples Section  

• Research Question : Is there a linear relationship between the amount of the bill (\$) at a restaurant and the tip (\$) that was left. Is the strength of this association different for family restaurants than for fine dining restaurants?
• Variables : There are two different measurement variables. The size of the tip would depend on the size of the bill so the amount of the bill would be the explanatory variable and the size of the tip would be the response variable.
• Null Hypothesis : The correlation between the amount of the bill (\$) at a restaurant and the tip (\$) that was left is the same at family restaurants as it is at fine dining restaurants.
• Alternative Hypothesis : The correlation between the amount of the bill (\$) at a restaurant and the tip (\$) that was left is the difference at family restaurants then it is at fine dining restaurants. This is a two-sided alternative hypothesis.

Module 9: Hypothesis Testing With One Sample

Null and alternative hypotheses, learning outcomes.

• Describe hypothesis testing in general and in practice

The actual test begins by considering two  hypotheses . They are called the null hypothesis and the alternative hypothesis . These hypotheses contain opposing viewpoints.

H 0 : The null hypothesis: It is a statement about the population that either is believed to be true or is used to put forth an argument unless it can be shown to be incorrect beyond a reasonable doubt.

H a : The alternative hypothesis : It is a claim about the population that is contradictory to H 0 and what we conclude when we reject H 0 .

Since the null and alternative hypotheses are contradictory, you must examine evidence to decide if you have enough evidence to reject the null hypothesis or not. The evidence is in the form of sample data.

After you have determined which hypothesis the sample supports, you make adecision. There are two options for a  decision . They are “reject H 0 ” if the sample information favors the alternative hypothesis or “do not reject H 0 ” or “decline to reject H 0 ” if the sample information is insufficient to reject the null hypothesis.

Mathematical Symbols Used in  H 0 and H a :

H 0 always has a symbol with an equal in it. H a never has a symbol with an equal in it. The choice of symbol depends on the wording of the hypothesis test. However, be aware that many researchers (including one of the co-authors in research work) use = in the null hypothesis, even with > or < as the symbol in the alternative hypothesis. This practice is acceptable because we only make the decision to reject or not reject the null hypothesis.

H 0 : No more than 30% of the registered voters in Santa Clara County voted in the primary election. p ≤ 30

H a : More than 30% of the registered voters in Santa Clara County voted in the primary election. p > 30

A medical trial is conducted to test whether or not a new medicine reduces cholesterol by 25%. State the null and alternative hypotheses.

H 0 : The drug reduces cholesterol by 25%. p = 0.25

H a : The drug does not reduce cholesterol by 25%. p ≠ 0.25

We want to test whether the mean GPA of students in American colleges is different from 2.0 (out of 4.0). The null and alternative hypotheses are:

H 0 : μ = 2.0

H a : μ ≠ 2.0

We want to test whether the mean height of eighth graders is 66 inches. State the null and alternative hypotheses. Fill in the correct symbol (=, ≠, ≥, <, ≤, >) for the null and alternative hypotheses. H 0 : μ __ 66 H a : μ __ 66

• H 0 : μ = 66
• H a : μ ≠ 66

We want to test if college students take less than five years to graduate from college, on the average. The null and alternative hypotheses are:

H 0 : μ ≥ 5

H a : μ < 5

We want to test if it takes fewer than 45 minutes to teach a lesson plan. State the null and alternative hypotheses. Fill in the correct symbol ( =, ≠, ≥, <, ≤, >) for the null and alternative hypotheses. H 0 : μ __ 45 H a : μ __ 45

• H 0 : μ ≥ 45
• H a : μ < 45

In an issue of U.S. News and World Report , an article on school standards stated that about half of all students in France, Germany, and Israel take advanced placement exams and a third pass. The same article stated that 6.6% of U.S. students take advanced placement exams and 4.4% pass. Test if the percentage of U.S. students who take advanced placement exams is more than 6.6%. State the null and alternative hypotheses.

H 0 : p ≤ 0.066

H a : p > 0.066

On a state driver’s test, about 40% pass the test on the first try. We want to test if more than 40% pass on the first try. Fill in the correct symbol (=, ≠, ≥, <, ≤, >) for the null and alternative hypotheses. H 0 : p __ 0.40 H a : p __ 0.40

• H 0 : p = 0.40
• H a : p > 0.40

Concept Review

In a  hypothesis test , sample data is evaluated in order to arrive at a decision about some type of claim. If certain conditions about the sample are satisfied, then the claim can be evaluated for a population. In a hypothesis test, we: Evaluate the null hypothesis , typically denoted with H 0 . The null is not rejected unless the hypothesis test shows otherwise. The null statement must always contain some form of equality (=, ≤ or ≥) Always write the alternative hypothesis , typically denoted with H a or H 1 , using less than, greater than, or not equals symbols, i.e., (≠, >, or <). If we reject the null hypothesis, then we can assume there is enough evidence to support the alternative hypothesis. Never state that a claim is proven true or false. Keep in mind the underlying fact that hypothesis testing is based on probability laws; therefore, we can talk only in terms of non-absolute certainties.

Formula Review

H 0 and H a are contradictory.

• OpenStax, Statistics, Null and Alternative Hypotheses. Provided by : OpenStax. Located at : http://cnx.org/contents/[email protected]:58/Introductory_Statistics . License : CC BY: Attribution
• Introductory Statistics . Authored by : Barbara Illowski, Susan Dean. Provided by : Open Stax. Located at : http://cnx.org/contents/[email protected] . License : CC BY: Attribution . License Terms : Download for free at http://cnx.org/contents/[email protected]
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What Is a Null Hypothesis?

The alternative hypothesis.

• Additional Examples
• Null Hypothesis and Investments

The Bottom Line

• Corporate Finance
• Financial Ratios

Null Hypothesis: What Is It, and How Is It Used in Investing?

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

A null hypothesis is a type of statistical hypothesis that proposes that no statistical significance exists in a set of given observations. Hypothesis testing is used to assess the credibility of a hypothesis by using sample data. Sometimes referred to simply as the “null,” it is represented as H 0 .

The null hypothesis, also known as “the conjecture,” is used in quantitative analysis to test theories about markets, investing strategies, and economies to decide if an idea is true or false.

Key Takeaways

• A null hypothesis is a type of conjecture in statistics that proposes that there is no difference between certain characteristics of a population or data-generating process.
• The alternative hypothesis proposes that there is a difference.
• Hypothesis testing provides a method to reject a null hypothesis within a certain confidence level.
• If you can reject the null hypothesis, it provides support for the alternative hypothesis.
• Null hypothesis testing is the basis of the principle of falsification in science.

Alex Dos Diaz / Investopedia

Understanding a Null Hypothesis

A gambler may be interested in whether a game of chance is fair. If it is, then the expected earnings per play come to zero for both players. If it is not, then the expected earnings are positive for one player and negative for the other.

To test whether the game is fair, the gambler collects earnings data from many repetitions of the game, calculates the average earnings from these data, then tests the null hypothesis that the expected earnings are not different from zero.

If the average earnings from the sample data are sufficiently far from zero, then the gambler will reject the null hypothesis and conclude the alternative hypothesis—namely, that the expected earnings per play are different from zero. If the average earnings from the sample data are near zero, then the gambler will not reject the null hypothesis, concluding instead that the difference between the average from the data and zero is explainable by chance alone.

A null hypothesis can only be rejected, not proven.

The null hypothesis assumes that any kind of difference between the chosen characteristics that you see in a set of data is due to chance. For example, if the expected earnings for the gambling game are truly equal to zero, then any difference between the average earnings in the data and zero is due to chance.

Analysts look to reject   the null hypothesis because doing so is a strong conclusion. This requires evidence in the form of an observed difference that is too large to be explained solely by chance. Failing to reject the null hypothesis—that the results are explainable by chance alone—is a weak conclusion because it allows that while factors other than chance may be at work, they may not be strong enough for the statistical test to detect them.

An important point to note is that we are testing the null hypothesis because there is an element of doubt about its validity. Whatever information that is against the stated null hypothesis is captured in the alternative (alternate) hypothesis (H 1 ).

For the examples below, the alternative hypothesis would be:

• Students score an average that is not equal to seven.
• The mean annual return of a mutual fund is not equal to 8% per year.

In other words, the alternative hypothesis is a direct contradiction of the null hypothesis.

Null Hypothesis Examples

Here is a simple example: A school principal claims that students in her school score an average of seven out of 10 in exams. The null hypothesis is that the population mean is not 7.0. To test this null hypothesis, we record marks of, say, 30 students ( sample ) from the entire student population of the school (say, 300) and calculate the mean of that sample.

We can then compare the (calculated) sample mean to the (hypothesized) population mean of 7.0 and attempt to reject the null hypothesis. (The null hypothesis here—that the population mean is not 7.0—cannot be proved using the sample data. It can only be rejected.)

Take another example: The annual return of a particular  mutual fund  is claimed to be 8%. Assume that the mutual fund has been in existence for 20 years. The null hypothesis is that the mean return is not 8% for the mutual fund. We take a random sample of annual returns of the mutual fund for, say, five years (sample) and calculate the sample mean. We then compare the (calculated) sample mean to the (claimed) population mean (8%) to test the null hypothesis.

For the above examples, null hypotheses are:

• Example A: Students in the school don’t score an average of seven out of 10 in exams.
• Example B: The mean annual return of the mutual fund is not 8% per year.

For the purposes of determining whether to reject the null hypothesis (abbreviated H0), said hypothesis is assumed, for the sake of argument, to be true. Then the likely range of possible values of the calculated statistic (e.g., the average score on 30 students’ tests) is determined under this presumption (e.g., the range of plausible averages might range from 6.2 to 7.8 if the population mean is 7.0).

If the sample average is outside of this range, the null hypothesis is rejected. Otherwise, the difference is said to be “explainable by chance alone,” being within the range that is determined by chance alone.

How Null Hypothesis Testing Is Used in Investments

As an example related to financial markets, assume Alice sees that her investment strategy produces higher average returns than simply buying and holding a stock . The null hypothesis states that there is no difference between the two average returns, and Alice is inclined to believe this until she can conclude contradictory results.

Refuting the null hypothesis would require showing statistical significance, which can be found by a variety of tests. The alternative hypothesis would state that the investment strategy has a higher average return than a traditional buy-and-hold strategy.

One tool that can determine the statistical significance of the results is the p-value. A p-value represents the probability that a difference as large or larger than the observed difference between the two average returns could occur solely by chance.

A p-value that is less than or equal to 0.05 often indicates whether there is evidence against the null hypothesis. If Alice conducts one of these tests, such as a test using the normal model, resulting in a significant difference between her returns and the buy-and-hold returns (the p-value is less than or equal to 0.05), she can then reject the null hypothesis and conclude the alternative hypothesis.

How Is the Null Hypothesis Identified?

The analyst or researcher establishes a null hypothesis based on the research question or problem they are trying to answer. Depending on the question, the null may be identified differently. For example, if the question is simply whether an effect exists (e.g., does X influence Y?), the null hypothesis could be H 0 : X = 0. If the question is instead, is X the same as Y, the H 0 would be X = Y. If it is that the effect of X on Y is positive, H 0 would be X > 0. If the resulting analysis shows an effect that is statistically significantly different from zero, the null can be rejected.

How Is Null Hypothesis Used in Finance?

In finance , a null hypothesis is used in quantitative analysis. It tests the premise of an investing strategy, the markets, or an economy to determine if it is true or false.

For instance, an analyst may want to see if two stocks, ABC and XYZ, are closely correlated. The null hypothesis would be ABC ≠ XYZ.

How Are Statistical Hypotheses Tested?

Statistical hypotheses are tested by a four-step process . The first is for the analyst to state the two hypotheses so that only one can be right. The second is to formulate an analysis plan, which outlines how the data will be evaluated. The third is to carry out the plan and physically analyze the sample data. The fourth and final step is to analyze the results and either reject the null hypothesis or claim that the observed differences are explainable by chance alone.

What Is an Alternative Hypothesis?

An alternative hypothesis is a direct contradiction of a null hypothesis. This means that if one of the two hypotheses is true, the other is false.

A null hypothesis states there is no difference between groups or relationship between variables. It is a type of statistical hypothesis and proposes that no statistical significance exists in a set of given observations. “Null” means nothing.

The null hypothesis is used in quantitative analysis to test theories about economies, investing strategies, and markets to decide if an idea is true or false. Hypothesis testing assesses the credibility of a hypothesis by using sample data. It is represented as H 0 and is sometimes simply known as “the null.”

Sage Publishing. “ Chapter 8: Introduction to Hypothesis Testing ,” Page 4.

Sage Publishing. “ Chapter 8: Introduction to Hypothesis Testing ,” Pages 4 to 7.

Sage Publishing. “ Chapter 8: Introduction to Hypothesis Testing ,” Page 7.

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Null Hypothesis

A hypothesis that states that there is no relationship between two population parameters

What is the Null Hypothesis?

The null hypothesis states that there is no relationship between two population parameters, i.e., an independent variable and a dependent variable . If the hypothesis shows a relationship between the two parameters, the outcome could be due to an experimental or sampling error. However, if the null hypothesis returns false, there is a relationship in the measured phenomenon.

The null hypothesis is useful because it can be tested to conclude whether or not there is a relationship between two measured phenomena. It can inform the user whether the results obtained are due to chance or manipulating a phenomenon. Testing a hypothesis sets the stage for rejecting or accepting a hypothesis within a certain confidence level.

Two main approaches to statistical inference in a null hypothesis can be used– significance testing by Ronald Fisher and hypothesis testing by Jerzy Neyman and Egon Pearson. Fisher’s significance testing approach states that a null hypothesis is rejected if the measured data is significantly unlikely to have occurred (the null hypothesis is false). Therefore, the null hypothesis is rejected and replaced with an alternative hypothesis.

If the observed outcome is consistent with the position held by the null hypothesis, the hypothesis is accepted. On the other hand, the hypothesis testing by Neyman and Pearson is compared to an alternative hypothesis to make a conclusion about the observed data. The two hypotheses are differentiated based on observed data.

• A null hypothesis refers to a hypothesis that states that there is no relationship between two population parameters.
• Researchers reject or disprove the null hypothesis to set the stage for further experimentation or research that explains the position of interest.
• The inverse of a null hypothesis is an alternative hypothesis, which states that there is statistical significance between two variables.

How the Null Hypothesis Works

A null hypothesis is a theory based on insufficient evidence that requires further testing to prove whether the observed data is true or false. For example, a null hypothesis statement can be “the rate of plant growth is not affected by sunlight.” It can be tested by measuring the growth of plants in the presence of sunlight and comparing this with the growth of plants in the absence of sunlight.

Rejecting the null hypothesis sets the stage for further experimentation to see a relationship between the two variables exists. Rejecting a null hypothesis does not necessarily mean that the experiment did not produce the required results, but it sets the stage for further experimentation.

To differentiate the null hypothesis from other forms of hypothesis, a null hypothesis is written as H 0 , while the alternate hypothesis is written as H A or H 1 . A significance test is used to establish confidence in a null hypothesis and determine whether the observed data is not due to chance or manipulation of data.

Researchers test the hypothesis by examining a random sample of the plants being grown with or without sunlight. If the outcome demonstrates a statistically significant change in the observed change, the null hypothesis is rejected.

Null Hypothesis Example

The annual return of ABC Limited bonds is assumed to be 7.5%. To test if the scenario is true or false, we take the null hypothesis to be “the mean annual return for ABC limited bond is not 7.5%.” To test the hypothesis, we first accept the null hypothesis.

Any information that is against the stated null hypothesis is taken to be the alternative hypothesis for the purpose of testing the hypotheses. In such a case, the alternative hypothesis is “the mean annual return of ABC Limited is 7.5%.”

We take samples of the annual returns of the bond for the last five years to calculate the sample mean for the previous five years. The result is then compared to the assumed annual return average of 7.5% to test the null hypothesis.

The average annual returns for the five-year period are 7.5%; the null hypothesis is rejected. Consequently, the alternative hypothesis is accepted.

What is an Alternative Hypothesis?

An alternative hypothesis is the inverse of a null hypothesis. An alternative hypothesis and a null hypothesis are mutually exclusive, which means that only one of the two hypotheses can be true.

A statistical significance exists between the two variables. If samples used to test the null hypothesis return false, it means that the alternate hypothesis is true, and there is statistical significance between the two variables.

Purpose of Hypothesis Testing

Hypothesis testing is a statistical process of testing an assumption regarding a phenomenon or population parameter. It is a critical part of the scientific method, which is a systematic approach to assessing theories through observations and determining the probability that a stated statement is true or false.

A good theory can make accurate predictions. For an analyst who makes predictions, hypothesis testing is a rigorous way of backing up his prediction with statistical analysis. It also helps determine sufficient statistical evidence that favors a certain hypothesis about the population parameter.

Additional Resources

Thank you for reading CFI’s guide to Null Hypothesis. To keep advancing your career, the additional resources below will be useful:

• Free Statistics Fundamentals Course
• Coefficient of Determination
• Independent Variable
• Expected Value
• Nonparametric Statistics
• See all data science resources
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What is The Null Hypothesis & When Do You Reject The Null Hypothesis

Julia Simkus

Editor at Simply Psychology

BA (Hons) Psychology, Princeton University

Julia Simkus is a graduate of Princeton University with a Bachelor of Arts in Psychology. She is currently studying for a Master's Degree in Counseling for Mental Health and Wellness in September 2023. Julia's research has been published in peer reviewed journals.

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Saul McLeod, PhD

Editor-in-Chief for Simply Psychology

BSc (Hons) Psychology, MRes, PhD, University of Manchester

Saul McLeod, PhD., is a qualified psychology teacher with over 18 years of experience in further and higher education. He has been published in peer-reviewed journals, including the Journal of Clinical Psychology.

Olivia Guy-Evans, MSc

Associate Editor for Simply Psychology

BSc (Hons) Psychology, MSc Psychology of Education

Olivia Guy-Evans is a writer and associate editor for Simply Psychology. She has previously worked in healthcare and educational sectors.

On This Page:

A null hypothesis is a statistical concept suggesting no significant difference or relationship between measured variables. It’s the default assumption unless empirical evidence proves otherwise.

The null hypothesis states no relationship exists between the two variables being studied (i.e., one variable does not affect the other).

The null hypothesis is the statement that a researcher or an investigator wants to disprove.

Testing the null hypothesis can tell you whether your results are due to the effects of manipulating ​ the dependent variable or due to random chance. 

How to Write a Null Hypothesis

Null hypotheses (H0) start as research questions that the investigator rephrases as statements indicating no effect or relationship between the independent and dependent variables.

It is a default position that your research aims to challenge or confirm.

For example, if studying the impact of exercise on weight loss, your null hypothesis might be:

There is no significant difference in weight loss between individuals who exercise daily and those who do not.

Examples of Null Hypotheses

When Do We Reject The Null Hypothesis? 

We reject the null hypothesis when the data provide strong enough evidence to conclude that it is likely incorrect. This often occurs when the p-value (probability of observing the data given the null hypothesis is true) is below a predetermined significance level.

If the collected data does not meet the expectation of the null hypothesis, a researcher can conclude that the data lacks sufficient evidence to back up the null hypothesis, and thus the null hypothesis is rejected. 

Rejecting the null hypothesis means that a relationship does exist between a set of variables and the effect is statistically significant ( p > 0.05).

If the data collected from the random sample is not statistically significance , then the null hypothesis will be accepted, and the researchers can conclude that there is no relationship between the variables. 

You need to perform a statistical test on your data in order to evaluate how consistent it is with the null hypothesis. A p-value is one statistical measurement used to validate a hypothesis against observed data.

Calculating the p-value is a critical part of null-hypothesis significance testing because it quantifies how strongly the sample data contradicts the null hypothesis.

The level of statistical significance is often expressed as a  p  -value between 0 and 1. The smaller the p-value, the stronger the evidence that you should reject the null hypothesis.

Usually, a researcher uses a confidence level of 95% or 99% (p-value of 0.05 or 0.01) as general guidelines to decide if you should reject or keep the null.

When your p-value is less than or equal to your significance level, you reject the null hypothesis.

In other words, smaller p-values are taken as stronger evidence against the null hypothesis. Conversely, when the p-value is greater than your significance level, you fail to reject the null hypothesis.

In this case, the sample data provides insufficient data to conclude that the effect exists in the population.

Because you can never know with complete certainty whether there is an effect in the population, your inferences about a population will sometimes be incorrect.

When you incorrectly reject the null hypothesis, it’s called a type I error. When you incorrectly fail to reject it, it’s called a type II error.

Why Do We Never Accept The Null Hypothesis?

The reason we do not say “accept the null” is because we are always assuming the null hypothesis is true and then conducting a study to see if there is evidence against it. And, even if we don’t find evidence against it, a null hypothesis is not accepted.

A lack of evidence only means that you haven’t proven that something exists. It does not prove that something doesn’t exist. 

It is risky to conclude that the null hypothesis is true merely because we did not find evidence to reject it. It is always possible that researchers elsewhere have disproved the null hypothesis, so we cannot accept it as true, but instead, we state that we failed to reject the null. 

One can either reject the null hypothesis, or fail to reject it, but can never accept it.

Why Do We Use The Null Hypothesis?

We can never prove with 100% certainty that a hypothesis is true; We can only collect evidence that supports a theory. However, testing a hypothesis can set the stage for rejecting or accepting this hypothesis within a certain confidence level.

The null hypothesis is useful because it can tell us whether the results of our study are due to random chance or the manipulation of a variable (with a certain level of confidence).

A null hypothesis is rejected if the measured data is significantly unlikely to have occurred and a null hypothesis is accepted if the observed outcome is consistent with the position held by the null hypothesis.

Rejecting the null hypothesis sets the stage for further experimentation to see if a relationship between two variables exists. 

Hypothesis testing is a critical part of the scientific method as it helps decide whether the results of a research study support a particular theory about a given population. Hypothesis testing is a systematic way of backing up researchers’ predictions with statistical analysis.

It helps provide sufficient statistical evidence that either favors or rejects a certain hypothesis about the population parameter. 

Purpose of a Null Hypothesis 

• The primary purpose of the null hypothesis is to disprove an assumption. 
• Whether rejected or accepted, the null hypothesis can help further progress a theory in many scientific cases.
• A null hypothesis can be used to ascertain how consistent the outcomes of multiple studies are.

Do you always need both a Null Hypothesis and an Alternative Hypothesis?

The null (H0) and alternative (Ha or H1) hypotheses are two competing claims that describe the effect of the independent variable on the dependent variable. They are mutually exclusive, which means that only one of the two hypotheses can be true. 

While the null hypothesis states that there is no effect in the population, an alternative hypothesis states that there is statistical significance between two variables. 

The goal of hypothesis testing is to make inferences about a population based on a sample. In order to undertake hypothesis testing, you must express your research hypothesis as a null and alternative hypothesis. Both hypotheses are required to cover every possible outcome of the study. 

What is the difference between a null hypothesis and an alternative hypothesis?

The alternative hypothesis is the complement to the null hypothesis. The null hypothesis states that there is no effect or no relationship between variables, while the alternative hypothesis claims that there is an effect or relationship in the population.

It is the claim that you expect or hope will be true. The null hypothesis and the alternative hypothesis are always mutually exclusive, meaning that only one can be true at a time.

What are some problems with the null hypothesis?

One major problem with the null hypothesis is that researchers typically will assume that accepting the null is a failure of the experiment. However, accepting or rejecting any hypothesis is a positive result. Even if the null is not refuted, the researchers will still learn something new.

Why can a null hypothesis not be accepted?

We can either reject or fail to reject a null hypothesis, but never accept it. If your test fails to detect an effect, this is not proof that the effect doesn’t exist. It just means that your sample did not have enough evidence to conclude that it exists.

We can’t accept a null hypothesis because a lack of evidence does not prove something that does not exist. Instead, we fail to reject it.

Failing to reject the null indicates that the sample did not provide sufficient enough evidence to conclude that an effect exists.

If the p-value is greater than the significance level, then you fail to reject the null hypothesis.

Is a null hypothesis directional or non-directional?

A hypothesis test can either contain an alternative directional hypothesis or a non-directional alternative hypothesis. A directional hypothesis is one that contains the less than (“<“) or greater than (“>”) sign.

A nondirectional hypothesis contains the not equal sign (“≠”).  However, a null hypothesis is neither directional nor non-directional.

A null hypothesis is a prediction that there will be no change, relationship, or difference between two variables.

The directional hypothesis or nondirectional hypothesis would then be considered alternative hypotheses to the null hypothesis.

Gill, J. (1999). The insignificance of null hypothesis significance testing.  Political research quarterly ,  52 (3), 647-674.

Krueger, J. (2001). Null hypothesis significance testing: On the survival of a flawed method.  American Psychologist ,  56 (1), 16.

Masson, M. E. (2011). A tutorial on a practical Bayesian alternative to null-hypothesis significance testing.  Behavior research methods ,  43 , 679-690.

Nickerson, R. S. (2000). Null hypothesis significance testing: a review of an old and continuing controversy.  Psychological methods ,  5 (2), 241.

Rozeboom, W. W. (1960). The fallacy of the null-hypothesis significance test.  Psychological bulletin ,  57 (5), 416.

Entrepreneurs, You Need To Test The Null Hypothesis

Those who have been in my classes know that I often bring in knowledge from other disciplines to add to our understanding of the process of entrepreneurship. In any given day I might bring in concepts from economics, psychology, music, theology, philosophy, biology, and any other number of areas of study to help us understand the process of new venture formation.

One concept that all aspiring entrepreneurs should pay attention to comes from statistics. It is the null hypothesis .

A website aptly called Null Hypothesis offers a very clear explanation using the silly hypothesis that "the loss of my socks is due to alien burglary." Rather than try and prove this hypothesis to be true, statistics takes the approach of supporting this hypothesis by refuting the opposite hypothesis of " the loss of my socks is nothing to do with alien burglary."

Null Hypothesis explains the process this way:

In statistics, the only way of supporting your hypothesis is to refute the null hypothesis. Rather than trying to prove your idea (the alternate hypothesis) right you must show that the null hypothesis is likely to be wrong - you have to 'refute' or 'nullify' the null hypothesis. Unfortunately, you have to assume that your alternate hypothesis is wrong until you find evidence to the contrary. So it's innocent until proven guilty for the aliens.

"So how does this apply to entrepreneurship, Professor?" 

Here is how it works.

Most aspiring entrepreneurs spend their waking hours trying to prove that their idea for a new business can work. They quickly gather some cursory industry data and talk with people already working in the industry with one thought in mind:  "What can I uncover that will validate my desire to open this business?" They selectively only pay attention to information that reaffirms their desire to get the business open as soon as possible. As a result, they fail to uncover information that may not paint such a rosy picture about the viability of the business idea.

When I talk with aspiring entrepreneurs, I always take the opposite approach. I start asking them questions that try to prove that their business idea cannot work. That is, I come at their idea using the null hypothesis.  I shoot as many holes in their idea as I can come up with.  If after I am done it is still standing, I feel better that they may be on to something.

Over the years this has resulted in some pretty frustrated students.

I once overheard a student exclaim, "That Dr. Cornwall sure is a negative guy for being an entrepreneurship professor!"

My approach has been called "being Cornwalled."  I have been labeled the "Simon Cowell" of entrepreneurship. 

It is not what my heart wants me to do. I would love to be their cheerleader. But I know that I am not helping them if all I do is blindly encourage them to jump ahead. 

One of the most important things I try to teach my students is to internalize the perspective of working from the null hypothesis. When they come up with their next "great idea," I want them to immediately take the null hypothesis that it cannot work, and start trying to disprove or nullify it. If the idea survives, then it is time to further develop the business model and possibly move toward launching the venture.

I know it may seem like we are coming at the same thing from only a slightly different angle.  But the difference in outcomes can be profound.

Once you start looking at a business idea from the null hypothesis, you uncover the weaknesses and holes in your business model.  If the idea survives evaluation from this perspective,  the odds are much better that the resulting business model will be much stronger when it comes time to launch than it would have been if all you did in your planning was try to rationalize starting the business.

If you cannot disprove the null hypothesis that the idea cannot work, you have saved yourself a lot of time, money and reputation capital from starting a business that was really doomed from the start.  And if you end up refuting the null hypothesis -- that the business cannot possibly work -- you can rest assured that your chances for success have grown significantly higher.

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