2.13 Chi-Squared - Proportion Test Rev Dy 20080610

2.
13 Chi-squared Test
and Proportion Test
Six Sigma Black Belt and Green Belt

Week 2
2008-06-10
Objectives
• Review the concepts of attribute data

• Introduce the basic concepts of
Chi-squared - Test for Independence
• Link Chi-squared to the DMAIC Roadmap
• Demonstrate application of Chi-squared
2008-06-10 © SKF Group Slide 1 SKF (Group Six Sigma) 2.13 Chi-squared - Proportion Test
Using Statistical Tools to analyse Data
• First determine the type of data

– Continuous (variables) or discrete (attribute)
• Refer to the 'Hypothesis Test Matrix' to determine

appropriate tool
• Use hypothesis testing to determine statistical
significance
The Data Type is important in choosing a
Hypothesis Test
Y = f(X1, X2, X3, ..., Xn)

Attribute or Attribute or Variable?
Variable?
By knowing and controlling the X’s, we reduce the

variability in Y.
We validate x’s and Y’s with hypothesis testing.
Analysis Matrix (Single X – Single Y)
X Data
Attribute Variable
Attribute
Proportion Defective,
Logistic Regression
Chi-squared
Y Data
Variable
Means/Medians Test,
Regression
t-Test, ANOVA
Hypothesis Tests Attribute Data
Attribute
Data
1 pop. 2 or more pop.

Proportion Independence
2 pop.
Z Test Z Test χ2 Test χ2 Test
Chi-squared Test
Attribute Data
Anything that can be classified

• Pass / Fail
• Category / Type
• 2 or more categories
Discrete
• Rating Scales
• Scale Groupings
Insight into
Y = f(X1, X2, X3, ..., Xn)
When to use Chi-squared
• A population is characterised by attribute data

Y = f(X)
• Responses and factors are attribute
• Each member of the population can be uniquely classified
according to a pair or set of attributes
• Each category of an attribute is mutually exclusive and
exhaustive
Chi-squared is used to compare two or more group proportions.
Are they the same or are they different?
Example
The Personnel Department wants to see if there is a link

between age (old and young) and whether that person
gets hired.
What’s the Y ? _____________ Type of Data ? ______________
What’s the X ? _____________ Type of Data ? ______________
What type of tool would you use ? ________________________
Example
The Personnel Department wants to see if there is a link

between age (old and young) and whether that person
gets hired.
Got Hired
What’s the Y ? _____________ Attribute
Type of Data ? ______________
Age
What’s the X ? _____________ Attribute
Type of Data ? ______________
Chi-squared
What type of tool would you use ? ________________________
The Hypothesis
With the Chi-squared Test for Independence, statisticians

assume most variables in life are independent, therefore:
H0: Data is Independent (Not Related)
(where Age & Hiring practices are independent)
HA: Data is Dependent (Related)

(where Age & Hiring practices are dependent)
The p-value is the probability that we are wrong in

rejecting the null hypothesis.
Hypothesis for Example
Let’s walk through our example ...
Assume we wanted to determine if age and hiring

practices are dependent or independent.
Therefore our hypotheses are stated as follows ...
H0: Age and Hiring Practices are independent
HA: Age and Hiring Practices are dependent
Contingency Table
Hired Not Hired Total
Old 30 150 180
Young 45 230 275
Total 75 380 455
Do Hiring Decisions depend on Age?
Step #1
We must develop an Observed Frequency Table by

breaking our attribute variables into different levels:
Age: Old & Young
Hiring Practices: Hired & Not Hired
We then collect data to perform the analysis.
Example: Hired Not Hired
Old 30 150
Young 45 230
Step #2
Calculate Column & Row Totals
Example: Hired Not Hired Total
Old 30 150 180
Young 45 230 275
Total 75 380 455
Step #3
• What would it look like if these factors were really

independent?
• Develop an expected frequency table.
Old
Young
How do we do that?
Step #3 Continued
• What would it look like if these factors were really

independent?
• Develop an expected frequency table.

75
Old x 180 180
455
Young 275
Total 75 380 455

Cell’s expected frequency is:
(Column Total) × (Row Total)

Grand Total
Step #3 Continued
We would expect the quantity of Old and Hired to be 29.6 if

the two factors were really independent.
Old 29.6 150.3

____ 180
Young 45.3
____ 229.7
____ 275
Total 75 380 455
You finish the table!

Step #4
Subtract the expected value from the observed (O-E)
Old 30-29.6=0.4 -____

0.3 180
Young -____
0.3 0.3
____ 275
Total 75 380 455

Step #5
Square the Differences (O-E)^2
Old (.4)×(.4)=.16 .09

____ 180
Young .09
____ .09
____ 275
Total 75 380 455

Step #6
Compute the Relative Squared Differences (O-E)^2 / E
Old .16 / 29.6 = .005 .0006

____ 180
Young .002
____ .0004
____ 275
Total 75 380 455

Step #7
The Chi-squared Statistic (χ2)

• Measures the difference between the observed and
expected counts in this way:
(Observed − Expected)2
χ2 =∑
Expected
Step #8
The sum of the relative squared differences is Chi-squared.

Find Chi-squared on the distribution to determine
significance.
0.30
0.25
0.20
0.15 p-value = Area under Curve

0.10 to Right of Chi-squared Statistic
0.05
0.00
0 1 2 3 4 5 6 7 8 9 10
Example: Chi-squared (χ2) = .005+.002+.0006+.0004 = .008

The p-value is far more than 0.05
so, we can’t reject H0 Hypothesis.
Conclusion: Hiring Practices are Independent of Age.
Another Example ...
Old 45 135
Young 45 230
What Decision Would You Make?

Determine which group proportions are different.
Determine why the group proportions are different.
Multiple Categories for each Attribute
Attribute Y
B1 B2 B3 B4 B5 . . .
A1
Attribute X
A2
A3
A4
A5
.
.
.
More complex relationships can be studied
Chi-squared Assumptions
1. The sample is representative of the population or

process.
2. The underlying population is binomial for discrete data.
3. The expected count is greater than or equal to 5 for

each cell. If less than 5, additional data will be needed.
Analysing the Data in MINITAB
Y variable
X variable
Analysing the Data in MINITAB
Chi-Square Test: Hired, Not Hired

Note:
Expected counts are printed below observed
counts The observed and expected
Chi-Square contributions are printed below
expected counts
counts are the same values
you calculated a moment ago.
Hired Not Hired Total
1 30 150 180
29.67 150.33
0.004 0.001
2 45 230 275
45.33 229.67
What Decision Would You Make?

0.002 0.000
Total 75 380 455
Chi-Sq = 0.007, DF = 1, P-Value = 0.932
p-value
Exercise - 1
The government performed a study to determine if there is

a relationship between geographic location and political
party preferences. The results are below:
East West
Republican 590 434
Democrat 232 1199
No Pref 45 83
Is there are any relationship between geographic location
and political party preference?
How could you use this information if you were planning a
political campaign?
Exercise - 2
Is there a relationship between parental influence and

having a felon record?
Data is below:
Felon Record No Felon Record

52 135
Single Mother
Single Father 30 80
Joint Parents 19 98
What are your conclusions?
Exercise - 3
Is there a relationship between on time delivery and the

shipment provider?
Data is below:
On-Time Late
70 11
Fed-Ex
UPS 46 9
Post Office 57 14
What are your conclusions?
Exercise - 1: Answer
Chi-Square Test: East, West

Expected counts are printed below observed counts
Chi-Square contributions are printed below expected counts
East West Total

MINITAB®
1 590 434 1024

343.71 680.29
176.479 89.165
2 232 1199 1431

480.32 950.68
128.382 64.864
3 45 83 128
42.96 85.04
0.096 0.049
Total 867 1716 2583
Chi-Sq = 459.035, DF = 2, P-Value = 0.000
There is a relationship between geographic location and political party preferences.
Chi-Square Test: Felon Record, No Felon Record

No
Felon Felon
MINITAB®
Record Record Total

1 52 135 187
45.62 141.38
0.892 0.288
2 30 80 110
26.84 83.16
0.373 0.120
3 19 98 117
28.54 88.46
3.191 1.030
Total 101 313 414
Chi-Sq = 5.894, DF = 2, P-Value = 0.053

There is not a relationship between parental influence and having a felon record.
Chi-Square Test: On Time, Later

On Time Later Total

MINITAB®
1 70 11 81
67.70 13.30
0.078 0.399
2 46 9 55
45.97 9.03
0.000 0.000
3 57 14 71
59.34 11.66
0.092 0.469
Total 173 34 207
Chi-Sq = 1.039, DF = 2, P-Value = 0.595
There is not a relationship between on time delivery and the shipment provider.
Marketing Application
Determine whether or not beer preferences change with gender and

age so that we can establish target markets accordingly. Below are
survey results of a sample of the population.
Age
Gender
What
What are
are your
your recommendations?
recommendations?
Chi-squared Summary
• Discrete data are commonly used to analyse process

performance in the service applications
• Non-significant differences between two or more groups
keep you from chasing ghosts
• Significant differences between group proportions can be
detected
• A low p-value indicates that root causes need to be
identified for the significant differences between groups
• Examine Chi-squared values for each cell to determine
which groups are different
• Consider whether the size of the "statistically significant"
difference is actually important to your business
Proportion Test
Hypothesis Tests Attribute Data
Attribute
Data
1 pop. 2 or more pop.

Proportion Independence
2 pop.
Z Test Z Test χ2 Test χ2 Test
Confidence Interval Estimate for Proportion
Example
• A distribution centre QA manager wants to know with 95%

confidence an interval estimate of the proportion of products that
have a history of picking the wrong quantity.
• A sample of 2,000 SKU’s (Stock Keeping Units) contained 250 SKU’s
that had at least one error in quantity picked.
1. What proportion of all SKU’s probably have had quantity errors?
2. Is this proportion higher than Company average of 11% of error in
SKU’s quantity picked?
3. After improvement actions has been implemented, a new sample of
450 SKU’s is taken, which contained 45 SKU’s that had at least one
error in quantity picked. Is this significantly better than in sample
above ?
Confidence Interval - Solution with MINITAB
Rule of Thumb:
Use the normal approximation
when np ≥ 10 and n(1 – p) ≥ 10.
In our case (p = 250/2000 =
0.125 and n= 2000), it’s OK.
The QA Manager can estimate with 95% confidence
that the proportion of SKU’s having errors is
between 11.05 % and 13.95%
The Same Solution – But manually
ps= 250/2000 = 0.125

ps (1 − ps )
n
= 0.007395
Z = 1.96
p(1 − p) Formula for Confidence Interval

p±z (approximating Normal Distribution)
n
0.125+1.96(0.007395) = 13.95%
0.125-1.96(0.007395) = 11.05%
Is this Proportion Higher than
Company Average of 11%?
• We will use 1 Proportion Test to check this:
Percentage of errors in this sample is significantly higher

than Company average of 11% (p is small 0.016)
Are Proportions from Two Samples Different?
Is proportion from the sample after improvement different

from the first one ?
• We will use 2 Proportion Test to find out:
p-value of 0.117 would suggest that we can’t reject

hypothesis that 2 sample proportions are equal.
But, we can increase the power of test by choosing one sided instead of two sided test
How to use One-sided Test?
H0 = two proportions are the same or smaller

HA = first proportion (250/2000 = 0.125) is greater than
second one (45/450 = 0.10)
Change "Alternative" from the last slide to "greater than"

After clicking OK on each window,
we get session window with new
(smaller) p-value of 0.059
p-value of 0.059 is very close

to significant level of 0.05.
What should we do now?
Improve Power of Test with more Samples
Let’s assume that we increase second sample from 450 to

600, and find total 60 defectives SKU’s (note that we kept
the same proportion of 0.10).
Repeat the test:
The p-value
is below the
significance
level of 0.05
Finally, we can say that

proportion of defective SKU’s
is better after improvements.
Summary
• Hypothesis Testing and Confidence Interval Testing

validates the x’s as stated in Null and Alternative
Hypotheses
• Follow the steps to ensure a valid conclusion
• Remember - sample size is critical; LARGER sample sizes
result in tighter, smaller confidence intervals.
• Reproduce test when sample size is small, if possible.

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2.

Six Sigma Black Belt and Green Belt

• Review the concepts of attribute data

• First determine the type of data

• Refer to the 'Hypothesis Test Matrix' to determine

Y = f(X1, X2, X3, ..., Xn)

By knowing and controlling the X’s, we reduce the

1 pop. 2 or more pop.

Z Test Z Test χ2 Test χ2 Test

Anything that can be classified

• A population is characterised by attribute data

The Personnel Department wants to see if there is a link

What’s the Y ? _____________ Type of Data ? ______________

What’s the X ? _____________ Type of Data ? ______________

What type of tool would you use ? ________________________

The Personnel Department wants to see if there is a link

With the Chi-squared Test for Independence, statisticians

HA: Data is Dependent (Related)

The p-value is the probability that we are wrong in

Let’s walk through our example ...

Assume we wanted to determine if age and hiring

Hired Not Hired Total

Old 30 150 180

Young 45 230 275

Total 75 380 455

Do Hiring Decisions depend on Age?

We must develop an Observed Frequency Table by

Example: Hired Not Hired

Calculate Column & Row Totals

Example: Hired Not Hired Total

Old 30 150 180

Young 45 230 275

Total 75 380 455

• What would it look like if these factors were really

Example: Hired Not Hired

• What would it look like if these factors were really

Example: Hired Not Hired Total

Total 75 380 455

(Column Total) × (Row Total)

We would expect the quantity of Old and Hired to be 29.6 if

Example: Hired Not Hired Total

Old 29.6 150.3

Total 75 380 455

You finish the table!

Subtract the expected value from the observed (O-E)

Example: Hired Not Hired Total

Old 30-29.6=0.4 -____

Total 75 380 455

You finish the table!

Square the Differences (O-E)^2

Example: Hired Not Hired Total

Old (.4)×(.4)=.16 .09

Total 75 380 455

You finish the table!

Compute the Relative Squared Differences (O-E)^2 / E

Example: Hired Not Hired Total

Old .16 / 29.6 = .005 .0006

Total 75 380 455

You finish the table!

The Chi-squared Statistic (χ2)

The sum of the relative squared differences is Chi-squared.

0.15 p-value = Area under Curve

Example: Chi-squared (χ2) = .005+.002+.0006+.0004 = .008

What’s the Y ? _ Type of Data ? __

What’s the X ? _ Type of Data ? __