How to tell if sample data come from a Normal distribution • Plot the data using Histogram – frequency of data values. The histogram should be bell-shaped. • Check the empirical rule: For a normal distribution 68% of the data are within 1 standard deviation of the mean. 95% of the data are within 2 standard deviation of the mean. 99.7 of the data are within 3 standard deviation of the mean. • Another useful plot is called qq-plot (“quantile-quantile” plot). It plots quantiles of data versus quantile of a normal distribution. If the data is indeed from a normal distribution we should see a straight line. STA261 week 11 1 Likelihood Ratio Tests - Introduction • Neyman-Pearson lemma provides a method of constructing most powerful tests for simple hypothesis when the distribution of the observations is known except for the value of a single unknown parameter. Sometimes it can be utilized to find uniformly most powerful test for composite hypothesis that involve a single parameter. • In many cases, the distribution of interest has more than one unknown parameter. • Likelihood ratio test is a general method used to derive tests of hypothesis for simple or composite hypotheses. STA261 week 11 2 Likelihood Ratio Test • The null hypothesis specifies that the parameter (possibly a vector) lies in a particular set of possible values denoted by Ω0 and the alternative hypothesis specifies another set of possible values denoted by Ωa, which does not overlap with Ω0. • Examples… • A likelihood ratio test has a test statistic Λ defined by ˆ L 0 ˆ L • For a fixed size α test the decision rule is: reject H0 if Λ ≤ k where k is determined such that P(Λ ≤ k | H0) = α. STA261 week 11 3 Translation of the Likelihood Ratio Test • Small value of Λ indicates that the likelihood of the sample is smaller under H0 and therefore the data suggest that H0 is false. • Large value of Λ indicates no evidence against H0. STA261 week 11 4 Distribution of the Likelihood Ratio Statistic • In many cased the distribution of the test statistic Λ is known and can be used to find k and the rejection region. • If the distribution of Λ is unknown we use the fact that 2 ln ~ (2r ) where r is the number of parameters specified in H0. This result is true for large n. • The critical region in this case is: reject H0 if 2 ln 2, ( r ) . STA261 week 11 5 Examples STA261 week 11 6