Z-test for two proportions

$Z$-test for two proportions

In this tutorial we will discuss about the step by step procedure of one sample $Z$-test for testing population proportion.

Suppose we want to compare two distinct populations $A$ and $B$ with respect to possessions of certain attribute among their members. Suppose take samples of sizes $n_1$ and $n_2$ from the population A and B respectively.

Let $X_1$ and $X_2$ be the observed number of successes i.e., number of units possessing the attributes, from the
two samples respectively.

Then, $\hat{p}_1=\frac{X_1}{n_1}$ be the observed proportion of successes in the sample from population $A$.
$\hat{p}_2=\frac{X_2}{n_2}$ be the observed proportion of successes in the sample from population $B$. The pooled estimate of sample proportion is $\hat{p} =\dfrac{X_1 +X_2}{n_1 + n_2}$.

Assumptions

Assumptions for testing a proportion are as follows:

a. The samples are random samples.

b. The sample data are independent of one another.

c. The populations are normally or approximately normally distributed and the sample sizes are less than 30.

Step by Step Procedure

We wish to test the null hypothesis $H_0 : p_1 = p_2$, i.e., the two proportions do not differ significantly.

The standard error of difference between two proportions is

$$ \begin{aligned} SE(\hat{p}_1-\hat{p}_2) = \sqrt{\frac{\hat{p}(1-\hat{p})}{n_1}+\frac{\hat{p}(1-\hat{p})}{n_2}} \end{aligned} $$

where $\hat{p} =\dfrac{X_1 +X_2}{n_1 + n_2}$ is the pooled estimate of sample proportion.

The step by step hypothesis testing procedure is as follows:

Step 1 State the hypothesis testing problem

The hypothesis testing problem can be structured in any one of the three situations as follows:

Situation Hypothesis Testing Problem
Situation A : $H_0: p_1=p_2$ against $H_a : p_1 < p_2$ (Left-tailed)
Situation B : $H_0: p_1=p_2$ against $H_a : p_1 > p_2$ (Right-tailed)
Situation C : $H_0: p_1=p_2$ against $H_a : p_1 \neq p_2$ (Two-tailed)

Step 2 Define the test statistic

The test statistic for testing above hypothesis is

$$ \begin{aligned} Z & = \frac{(\hat{p}_1-\hat{p}_2)-(p_1-p_2)}{SE(\hat{p}_1-\hat{p}_2)}\\\ & = \frac{(\hat{p}_1-\hat{p}_2)-(p_1-p_2)}{\sqrt{\frac{\hat{p}(1-\hat{p})}{n_1}+\frac{\hat{p}(1-\hat{p})}{n_2}}} \end{aligned} $$

The test statistic $Z$ follows standard normal distribution $N(0,1)$.

Step 3 Specify the level of significance $\alpha$

Specify the value of level of significance $\alpha$.

Step 4 Determine the critical values

For the specified value of $\alpha$ determine the critical region depending upon the alternative hypothesis.

  • For left-tailed alternative hypothesis: Find the $Z$-critical value using

$$ \begin{aligned} P(Z < -Z_\alpha) &= \alpha. \end{aligned} $$

  • For right-tailed alternative hypothesis: $Z_\alpha$.

$$ \begin{aligned} P(Z > Z_\alpha) &= \alpha. \end{aligned} $$

  • For two-tailed alternative hypothesis: $Z_{\alpha/2}$.

$$ \begin{aligned} P(|Z| > Z_{\alpha/2}) &= \alpha. \end{aligned} $$

Step 5 Computation

Compute the test statistic under the null hypothesis $H_0$ using equation

$$ \begin{aligned} Z_{obs} & = \frac{\hat{p}_1-\hat{p}_2-0}{\sqrt{\frac{\hat{p}(1-\hat{p})}{n_1}+\frac{\hat{p}(1-\hat{p})}{n_2}}} \end{aligned} $$

Step 6 Decision (Traditional Approach)

It is based on the critical values.

  • For left-tailed alternative hypothesis: Reject $H_0$ if $Z_{obs}\leq -Z_\alpha$.
  • For right-tailed alternative hypothesis: Reject $H_0$ if $Z_{obs}\geq Z_\alpha$.
  • For two-tailed alternative hypothesis: Reject $H_0$ if $|Z_{obs}|\geq Z_{\alpha/2}$.

OR

Step 6 Decision ($p$-value Approach)

It is based on the $p$-value.

Alternative Hypothesis Type of Hypothesis $p$-value
$H_a: p_1 < p_2$ Left-tailed $p$-value $= P(Z\leq Z_{obs})$
$H_a: p_1 > p_2$ Right-tailed $p$-value $= P(Z\geq Z_{obs})$
$H_a: p_1\neq p_2$ Two-tailed $p$-value $= 2P(Z\geq abs(Z_{obs}))$

If $p$-value is less than $\alpha$, then reject the null hypothesis $H_0$ at $\alpha$ level of significance, otherwise fail to reject $H_0$ at $\alpha$ level of significance.

Endnote

In this tutorial, you learned the $Z$-test for testing single proportion and the assumptions for $Z$-test for testing population proportion. You also learned about the step by step procedure to apply $Z$-test for testing single proportion.

To learn more about other hypothesis testing problems, hypothesis testing calculators and step by step procedure, please refer to the following tutorials:

Let me know in the comments if you have any questions on $Z$-test for population proportion and your thought on this article.

VRCBuzz co-founder and passionate about making every day the greatest day of life. Raju is nerd at heart with a background in Statistics. Raju looks after overseeing day to day operations as well as focusing on strategic planning and growth of VRCBuzz products and services. Raju has more than 25 years of experience in Teaching fields. He gain energy by helping people to reach their goal and motivate to align to their passion. Raju holds a Ph.D. degree in Statistics. Raju loves to spend his leisure time on reading and implementing AI and machine learning concepts using statistical models.

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