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MODULE 7.3: HYPOTHESIS TESTS AND CONFIDENCE INTERVALS

EXAMPLE: Hypothesis test for significance of regression coefficients: The estimated slope coefficient from the ABC example is 0.64
with a standard error equal to 0.26. Assuming that the sample has 36 observations, determine if the estimated slope coefficient is
significantly different than zero at a 5% level of significance.

The critical two-tailed t-values are ± 2.03
(from the t-table with df = 36 – 2 = 34).

t > t critical (i.e., 2.46 > 2.03),

We Reject Ho and conclude that the slope is different from zero.

When we did this same test for but for the confidence internal for the slope coefficient, we had:

Any observation?

Same conclusion: Reject Ho and conclude that the slope coefficient is statistically significant.