Statistics for Management II (MGMT2073) 2025/2026

CHAPTER FOUR

4. CHI-SQUAREDISTRIBUTIONS

4.1. Areas of application

The chi-square distribution was used to find a confidence interval for a variance or standard
deviation and to test a hypothesis about a single variance or standard deviation.

It can also be used for tests concerning frequency distributions, such as “If a sample of buyers
is given a choice of automobile colors, will each color be selected with the same frequency?”
The chi-square distribution can be used to test the independence of two variables, for
example, “Are senators ‘opinions on gun control independent of party affiliations?” That is,
do the Republicans feel one way and the Democrats feel differently, or do they have the same
opinion?

Finally, the chi-square distribution can be used to test the homogeneity of proportions. For
example, is the proportion of high school seniors who attend college immediately after
graduating the same for the northern, southern, eastern, and western parts of the United
States? This chapter explains the chi-square distribution and its applications. In addition to
the applications mentioned here, chi-square has many other uses in statistics.

4.1.1. Tests for independence between two variables

The chi-square independence test can be used to test the independence of two variables. For
example, suppose a new postoperative procedure is administered to a number of patients in a
large hospital. The researcher can ask the question, do the doctors feel differently about this
procedure from the nurses, or do they feel basically the same way? Note that the question is
not whether they prefer the procedure but whether there is a difference of opinion between
the two groups.
 Suppose we have a population consisting of observations having two attributes or
qualitative characteristics say A and B.
 If the attributes are independent then the probability of possessing both A and B is
PA*PB B
Where,
 PA is the probability that a number has attribute A.
 PB is the probability that a number has attribute B.
 Suppose A has r mutually exclusive and exhaustive classes.

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 B has c mutually exclusive and exhaustive classes

 The entire set of data can be represented using r* c contingency table.
B
A B1 B2 . . Bj . Bc Total
A1 O11 O12 O1j O1c R1
A2 O21 O22 O2j O2c R2
.
.
Ai Oi1 Oi2 Oij Oic Ri
.
.
Ar Or1 Or2 Orj Orc
Total C1 C2 Cj n

- The chi-square procedure test is used to test the hypothesis of independency of two
attributes For instance we may be interested
 Whether the presence or absence of hypertension is independent of smoking habit or
not.
 Whether the size of the family is independent of the level of education attained by
the mothers.
 Whether there is association between father and son regarding boldness.
 Whether there is association between stability of marriage and period of
acquaintance ship prior to marriage.

- The  statistic is given by:

2

r c  (Oij  eij ) 2 
 2 cal    
 ~  ( r 1)(c 1)
2
i 1 j 1 
 eij
Where Oij  the number of units that belong to category i of A and j of B.
eij  Expected frequencythat belong to category i of A and j of B.

eij
- The is given by :
Where Ri  the i th row total.
Ri * C j C j  the j th column total.
eij 
n n  total number of oservations
r c r c
Remark: n   Oij   eij
i 1 j 1 i 1 j 1

- The null and alternative hypothesis may be stated as:

H 0 : There is no association between A and B.
H1 : not H 0 ( There is association between A and B).

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- Decision Rule: Reject H0 for independency at 𝛼 level of significance if the calculated

value of 𝑋 2 exceeds the tabulated value with degree of freedom equal to 𝑋 2 𝛼
(r  1)(c  1) .

 (Oij  eij ) 2 
r c
H 0 if  cal   
2

 Reject 
i 1 j 1  eij   2 ( r 1)(c 1) at 

Examples:

A survey was taken on how a lump-sum pension would be invested by 45-year-olds and 65-
year-olds. The data are shown here. At a 0.05, is there a relationship between the age of the
investor and the way the money would be invested?

Age of way the money would be invested

investor Large company small company
stoke fund stoke fund
Age 45 85 59
Age 65 65 91

Using   5% , test whether there is association between Age of investor and the way the
money would be invested.
Solution:
H 0 : Thereis no association between Age of investor and way the money wouldbeinvested.
H 1 : not H 0
- First calculate the row and column totals
R1  144 , R2  156 , C1  150 , C2  150
- Then calculate the expected frequencies( eij’s)
Ri * C j
eij 
n
R * C 144 *150 R1 * C2 144 *150
e11  1 1   72 e12    72
 n 300 n 300

R2 * C1 156 *150 R * C2 156 *150

e21    78 e22  2   78
n 300 n 300
- Obtain the calculated value of the chi-square.
2  (Oij  eij ) 2 
2
 2 cal    
i 1 j 1 
 eij 
(85  72) 2 (59  72) 2 (65  78) 2 (91  78) 2
     9.028
72 72 78 78
- Obtain the tabulated value of chi-square

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 Statistics for Management II (MGMT2073) 2025/2026

  0.05
Degreesof freedom  (r  1)(c  1)  1*1  1
 02.05 (1)  3.841 from table.

- The decision is to reject H0 since 

2
cal   02.05 (1)
Conclusion: At 5% level of significance we have evidence to say there is association
between Age of investor and the way the money would be invested, based on this sample
data.
4.1.2. Tests for the equality of several proportions
The second chi-square test that uses a contingency table is called the homogeneity of
proportions test. In this situation, samples are selected from several different populations, and
the researcher is interested in determining whether the proportions of elements that have a
common characteristic are the same for each population. The sample sizes are specified in
advance, making either the row totals or column totals in the contingency table known before
the samples are selected. For example, a researcher may select a sample of 50 freshmen, 50
sophomores, 50 juniors, and 50 seniors and then find the proportion of students who are
smokers in each level. The researcher will then compare the proportions for each group to see
if they are equal. The hypotheses in this case would be
𝐻0 : 𝑃1 = 𝑃2 = 𝑃3 = 𝑃4
𝐻0 : 𝐴𝑡 𝑙𝑒𝑎𝑠𝑡 𝑜𝑛𝑒 𝑝𝑟𝑜𝑝𝑜𝑟𝑡𝑖𝑜𝑛 𝑖𝑠 𝑑𝑖𝑓𝑓𝑒𝑟𝑒𝑛𝑡 𝑓𝑟𝑜𝑚 𝑡ℎ𝑒 𝑜𝑡ℎ𝑒𝑟𝑠.
If the researcher does not reject the null hypothesis, it can be assumed that the proportions are
equal and the differences in them are due to chance. Hence, the proportion of students who
smoke is the same for grade levels freshmen through senior. When the null hypothesis is
rejected, it can be assumed that the proportions are not all equal. The computational
procedure is the same as that for the test of independence shown in Example 1.

Example1:

A psychologist selected 100 people from each of four income groups and asked them if they
were “very happy.” The percent for each group who responded yes and the number from the
survey are shown in the table. At a 0.05 test the claim that there is no difference in the
proportions.

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