ECONOMETRICS BASICS

1
Review I: Basics
Introduction to Econometrics
Conducting an Econometric Study
The Summation Operator
Properties of Random Variables
Probability Distribution
Some Useful Results
What Is Econometrics?
Possible answers:
1. Econometrics is the science of testing economic theories.
2. Econometrics is the set of tools used for forecasting future
values of economic variables, such as a firms sales, the
growth rate of an economy, or stock prices.
3. Econometrics is the process of fitting mathematical models
to economic data.
4. Econometrics is the art and science of using historical data
to make quantitative policy recommendations in government
and business.
What Is Econometrics?
All these answers are correct!!!
At a broad level, we define,
Econometrics is the study of the application of
statistical methods to economic problems

Econometric methods are widely used in Finance,
Labour Economics, Microecononmics,
Macroeconomics, Public Finance, Marketing, Industrial
Organization, Health, etc.
Why study Econometrics?
Rare in economics (and many other areas without
labs!) to have experimental data.

Need to use non-experimental, or observational
data to make inferences.

Important to be able to apply economic theory to
real world data.
Why study Econometrics?
An empirical analysis uses data to test a theory
or to estimate a relationship.

A formal economic model can be tested.

Theory may be ambiguous as to the effect of
some policy change can use econometrics to
evaluate the program.
The Question of Causality
Simply establishing a relationship between
variables is rarely sufficient.
Want to the effect to be considered causal.
If weve truly controlled for enough other
variables, then the estimated ceteris paribus
effect can often be considered to be causal.
Can be difficult to establish causality.
Example: Measuring the Return to
Education
A model of human capital investment implies
getting more education should lead to higher
earnings.
In the simplest case, this implies an equation
like
Earnings = |
1
+

|
1
Education +c
Example (cont.)
The estimate of |
1
, is the return to education, but
can it be considered causal?
While the error term, c, includes other factors
affecting earnings, want to control for as much
as possible.
Some things are still unobserved, which can be
problematic.
Conducting an Econometric Study
Step 1: Develop a Research Question (Hypothesis)
Step 2: Develop an economic model to frame the
question
Step 3: Collecting data to estimate the parameters of
the model
Step 4: Model Specification and testing
Step5: Present the findings and interpret the results
(prediction or forecasting?)
Examples
Does Reducing Class Size Improve Elementary
School Education?
Is there a Racial Discrimination in the Market for
Home Loans?
How much Do Cigarette Taxes Reduce
Smoking?
What will the Rate of Inflation be Next Year?

Examples (cont.)
Economic Model of Crime
Job Training and Worker Productivity
Effects of Fertilizer on Crop Yield
The Effect of Law Enforcement on City Crime
Levels
The Effect of the Minimum Wage on
Unemployment
What is a random Variable?
- it takes a single, specific value
- We dont know in advance what value it takes
- We do know all possible values it may take
- We know the probability that it will take any one of those possible values
Expected value (or population mean value): The
expected value of a discrete random variable X is:
E X X P X
i
i
I
i
( ) ( ). = =
=
1
Properties of Expected Value
( )
1
2
3
4
5
6
. ( ) ,
.
.
( )
( )
.
. ( ) ( ) ( ) .
. ( ) ( ), .
. ( ) ( ) , .
E b b b
. E(X+Y)=E(X)+E(Y)
E
X
Y
E X
E Y
E XY E X E Y
E aX aE X a
E aX b aE X b a b
=
=
=
=
+ = +
is a constant.
unless they are indpend
constant
and are constants
Sisir Sarma 18.318: Introduction to Econometrics
Properties of Expected Value
The law of large numbers: Suppose one repeatedly observes
different realized values of a random variable and calculates
the mean of the realized values. The mean will tend to be
close to the expected value; the more times one observes the
random variable, the closer the mean will tend to be.
The expected value of a random variable (say, stock price) does
not tell us how much it will go up or down. The variance
provides a measure of how far the random variable is likely to
be away from its mean.
For a discrete random variable, the variance (o
2
= E(X - )
2
is
calculated by:

Since the variance is the average value of the squared distance
between X
i
and , it does not have an easy interpretation.
The standard deviation is a very useful measure. The standard
deviation o of a random variable is equal to the square root of
the variance of the random variable.
( ) ( )
Var X X P X
i i
i
I
( ) = =
=
o
2
2
1
Properties of Variance
1. Var(constant) = 0
2. If X and Y are two independent random variables, then
Var(X + Y) = Var(X) + Var (Y) and
Var(X - Y) = Var(X) + Var (Y)
3. If b is a constant then Var(b+X) = Var(X)
4. If a is a constant then Var(aX) = a
2
Var(X)
5. If a and b are constants then Var(aX+b) = a
2
Var(X)
6. If X and Y are two independent random variables and a and b
are constants then Var(aX+bY) = a
2
Var(X) + b
2
Var(Y)
Covariance
Covariance: For two discrete random variables X and Y
with E(X) =
x
and E(Y) =
y
, the covariance between
X and Y is defined as Cov(XY) = o
xy
= E(X -
x
) E(Y -
y
) = E(XY) -
x
y
.
To computer the covariance, we use the following
formula:

( )
( ) ( )
o
xy i x
j
J
j y
i
I
i j
X Y P X Y =
= =

1 1
,
Covariance
In general, the covariance between two random variables can be
positive or negative. If two random variables move in the same
direction, then the covariance will be positive, if they move in
the opposite direction the covariance will be negative.
Properties:
1.If X and Y are independent random variables, their covariance
is zero. Since E(XY) = E(X)E(Y)
2. Cov(XX) = Var(X)
3. Cov(YY) = Var(Y)
Correlation Coefficient
The covariance tells the sign but not the magnitude about
how strongly the variables are positively or negatively
related. The correlation coefficient provides such measure
of how strongly the variables are related to each other.
For two random variables X and Y with E(X) =
x
and E(Y) =
y
, the correlation coefficient is defined as

o o
o
o o
xy
x y
xy
x y
Cov XY
= =
( )
Correlation Coefficient
1. Like the covariance, the correlation coefficient can be
positive or negative same sign as the covariance.
2. The correlation coefficient always lies between 1
and + 1. 1: perfectly negatively correlated and + 1:
perfectly positively correlated.
3. Variances of correlated variables:
Var(X + Y) = Var(X) + Var(Y) + 2Cov(X,Y)
Var(X - Y) = Var(X) + Var(Y) 2Cov(X,Y)
The Normal Distribution
The normal family of distributions occurs much more often in
econometrics than any other parametric family.
One reason for this is that the sum of a large number of
independent random variables has an approximately normal
distribution.
Normal distributions are symmetrical about the mean, and the
normal probability curve is the familiar bell-shaped curve. The
mean, median, and mode are equal for this family of
distributions
Shape of the Normal Distribution
0
0. 1
0. 2
0. 3
y
-4 -2 2 4
u
Normal Distribution
A normally distributed random variable X with
mean
x
and variance o
x
2
is written as X ~ N(
x
,
o
x
2
).

Standard Normal: A normally distributed random
variable Z with mean 0 and variance 1is written
as Z ~ N(0,1).

Normal Distribution
The PDF of a normally distributed random
variable X with mean
x
and variance o
x
2
is
given by

The PDF of a Standard Normal random variable
Z is given by

P X e
i
X
i x
x
( ) =
|
\
|
.
|
1
2
2
1
2
2
to
o
( )
P Z e
i
Z
i
( ) =
1
2
1
2
2
t
Properties of N.D.
1. The normal distribution curve is symmetrical
around its mean value.
2. The The PDF of the distribution is highest at
its mean value. That is, the probability of
obtaining a value of a normally distributed r.v. far
away from its mean value becomes
progressively smaller.
Properties of N.D. (cont.)
3. Approximately 68% of the area under the
normal curve lies between
Approximately 95% of the area under the
Approximately 99.7% of the area under the
o
x x
o
x x
2
o
x x
3
4. A normally distributed random variable is fully
described by its two parameters: mean and
variance.
5. A linear combination of two or more normally
distributed random variables is itself normally
distributed.
6. For a normal distribution, skewness is zero
and kurtosis is 3.
(Note: Skewness is (square of the 3
rd

moment)/(cube of the 2
nd
moment) and kurtosis
is (fourth moment)/square of the 2
nd
moment)
7. Z-transformation:
X ~ N(
x
, o
x
2
) then (X -
x
)/o
x
. ~ N(0,1)
Useful Results

( )
( )
( )
( )
( )
1. Suppose that then the average value
of a sample of observations of is also normally distributed.
That is, ~
2. Central Limit Theorem: Suppose that then the
average value of a sample of observations of is approximately
normally distributed.That is, ~
3. Statistics: Suppose that then the
for the chance that will be less than a
given value is =
X N
N X
N
N
X unknown
N X
N
N
t X N
t statistic
X t
X
*
*
~ ,

, .
~ ,
, .
~ ,
o

o
o

o
o
2
2
2
2
2
Properties of t distribution
The t distribution like the normal distribution is
symmetric. It is a little bit wider and flatter than
the standard normal distribution.
The mean of the t distribution, like the standard
normal distribution is zero, but its variance is
k/(k-2), where k is the d.f. Thus, variance is
defined for d.f.>2.
_
2
Distribution
If X ~ N(0,1), then X
2
is also random and it
takes the _
2
(Chi-square) distribution with 1 d.f.
That is, X
2
~ _
2
(1)
.
If N independent random variables X
1
, X
2
, , X
k

are all distributed N(0,1), then the sum of their
squares are also random and has the _
2

distribution with k d.f. That is, X
i
2
~ _
2
(k)
.
Properties of _
2
Distribution
1. Unlike the normal distribution, the _
2
distribution takes
only positive values and ranges from 0 to +.
2. Unlike the normal distribution, the _
2
distribution is a
skewed distribution, the degree of skewness depending on
the d.f. For a relatively few d.f., the distribution is highly
skewed to the right, but as the d.f. increases, the distribution
becomes increasingly symmetrical and approaches the
normal distribution.
33
Estimating Means
34
Introduction
Statistical inference is the process by which we
acquire information about populations from
samples.
There are two types of inference:
Confidence interval
Hypotheses testing

35
Concepts of Estimation
The objective of estimation is to determine the
value of a population parameter on the basis of a
sample statistic.
There are two types of estimators:
Point Estimator
Interval estimator

36
Point Estimator
A point estimator draws inference
about a population by estimating the
value of an unknown parameter using a
single value or point.
An interval estimator draws inferences
about a population by estimating the
value of an unknown parameter using
an interval.

37
Selecting the right sample statistic to estimate a
parameter value depends on the characteristics of the
statistic.
Estimators Characteristics
Estimators desirable characteristics:
Unbiasedness: An unbiased estimator is one whose
expected value is equal to the parameter it
estimates.
Consistency: An unbiased estimator is said to be
consistent if the difference between the estimator
and the parameter grows smaller as the sample size
increases.
Relative efficiency: For two unbiased estimators, the
one with a smaller variance is said to be relatively
efficient.
38
Estimating the Population Mean when the
Population Variance is Known
How is an interval estimator produced from a
sampling distribution?
A sample of size n is drawn from the population, and
its mean is calculated.
By the central limit theorem is normally distributed
(or approximately normally distributed.), thus
x
x
39
n
x
Z
o

=
We have established before that
o =
o
+ s s
o

o o
1 )
n
z x
n
z ( P
2 2
Estimating the Population Mean when the
Population Variance is Known
40
o =
o
+ s s
o
o o
1 )
n
z x
n
z x ( P
2 2
This leads to the following equivalent
statement
The Confidence Interval for ( o is known)
The confidence interval
41
Interpreting the Confidence Interval for
1 o of all the values of obtained in repeated
sampling from a given distribution, construct an interval

that includes (covers) the expected value of the
population.
x
(
o
+
o
o o
n
z x ,
n
z x
2 2
42
Four commonly used confidence levels
Confidence
level o o/2
0.90 0.10 0.05 1.645
0.95 0.05 0.025 1.96
0.98 0.02 0.01 2.33
0.99 0.01 0.005 2.575
z
o/2

43
Example: Estimate the mean value of the distribution resulting from
the throw of a fair die. It is known that o = 1.71. Use a 90%
confidence level, and 100 repeated throws of the die

Solution: The confidence interval is
=
o
o
n
z x
2
28 . x
100
71 . 1
645 . 1 x =
The mean values obtained in repeated draws of samples of
size
100 result in interval estimators of the form
[sample mean - .28, Sample mean + .28],
90% of which cover the real mean of the distribution.
44
The width of the 90% confidence interval = 2(.28) = .56
The width of the 95% confidence interval = 2(.34) = .68
Because the 95% confidence interval is wider, it
is
more likely to include the value of .
45
Example 1
Doll Computer Company delivers computers directly to
its customers who order via the Internet.
To reduce inventory costs in its warehouses Doll
employs an inventory model, that requires the estimate
of the mean demand during lead time.
It is found that lead time demand is normally distributed
with a standard deviation of 75 computers per lead
time.
Estimate the lead time demand with 95% confidence.
46
Example 1 Solution
The parameter to be estimated is , the mean
demand during lead time.
We need to compute the interval estimation for .
From the data provided in file Xm10-01, the sample
mean is

. 16 . 370 = x
| | 56 . 399 , 76 . 340 40 . 29 16 . 370
25
75
96 . 1 16 . 370
25
75
z 16 . 370
n
z x
025 . 2
= = =
=
o
o
Since 1 - o =.95, o = .05.
Thus o/2 = .025. Z
.025
= 1.96
47
Recall that when o

is known we use the following
statistic to estimate and test a population mean

When o

is unknown, we use its point estimator s,
and the z-statistic is replaced then by the t-statistic
Inference About a Population Mean When
the Population Standard Deviation Is
Unknown
n
x
z
o

=
48
The t - Statistic
n
x
=
s
n
x
o

=
Z
When the sampled population is normally distributed,
the t statistic is Student t distributed.
t
49
The t - Statistic
n
x
=
s
0
The t distribution is mound-shaped,
and symmetrical around zero.
The degrees of freedom,
(a function of the sample size)
determine how spread the
distribution is (compared to the
normal distribution)
d.f. = v
2

d.f. = v
1

v
1
< v
2

t
50
Estimating when o is unknown
Confidence interval estimator of when o

is
unknown
1 n . f . d
n
s
t x
2
=
o
51
Example
An investor is trying to estimate the return on
investment in companies that won quality awards
last year.
A random sample of 83 such companies is selected,
and the return on investment is calculated had he
invested in them.
Construct a 95% confidence interval for the mean
return.
52
Solution (solving by hand)
The problem objective is to describe the population
of annual returns from buying shares of quality
award-winners.
The data are interval.
Solving by hand
31 . 8 98 . 68
98 . 68 02 . 15
2
= =
= =
s
s x
| | 85 . 16 , 19 . 13
83
31 . 8
990 . 1 02 . 15
1 , 2
= ~
n
s
t x
n o
t
.025,82
~ t
.025,80
53
Inference About a Population
Proportion
When the population consists of nominal data, the
only inference we can make is about the
proportion of occurrence of a certain value.
The parameter p was used before to calculate
these probabilities under the binomial distribution.

54
. size sample n
. successes of number the x
where
n
x
p
=
Statistic and sampling distribution
the statistic used when making inference about p is:
Under certain conditions, [np > 5 and n(1-p) > 5],
is approximately normally distributed, with
= p and o
2
= p(1 - p)/n.
p
Inference About a Population

Proportion
55
Testing and Estimating the Proportion
Test statistic for p
Interval estimator for p (1-o confidence
level)
5 ) p 1 ( n and 5 np where
n / ) p 1 ( p
p p
Z
> >
=
5 ) p
1 ( n and 5 p
n prov ided
n / ) p
1 ( p
z p
2 /
> >

o
56
Nielsen Ratings
In a survey of 2000 TV viewers at 11.40 p.m. on a
certain night, 226 indicated they watched The Tonight
Show.
Estimate the number of TVs tuned to the Tonight Show
in a typical night, if there are 100 million potential
television sets. Use a 95% confidence level.
Solution
014 . 113 .
2000 / ) 113 . 1 ( 113 . 96 . 1 113 . / )
1 (

2 /
= n p p z p
o
Estimating the Proportion
57
Hypothesis Testing
58
Introduction
The purpose of hypothesis testing is to determine
whether there is enough statistical evidence in favor of
a certain belief about a parameter.
Examples
Is there statistical evidence in a random sample of potential
customers, that support the hypothesis that more than 10% of the
potential customers will purchase a new products?
Is a new drug effective in curing a certain disease? A sample of
patients is randomly selected. Half of them are given the drug
while the other half are given a placebo. The improvement in the
patients conditions is then measured and compared.
59
Concepts of Hypothesis Testing
The critical concepts of hypothesis testing.
Example:
An operation manager needs to determine if the mean
demand during lead time is greater than 350.
If so, changes in the ordering policy are needed.
There are two hypotheses about a population mean:
H
0
: The null hypothesis = 350
H
1
: The alternative hypothesis > 350
60
Types of Errors
Two types of errors may occur when deciding whether
to reject H
0
based on the statistic value.

Type I error: Reject H
0
when it is true.
Type II error: Do not reject H
0
when it is false.
Example continued
Type I error: Reject H
0
( = 350) in favor of H
1
( >
350) when the real value of is 350.
Type II error: Believe that H
0
is correct ( = 350)
when the real value of is greater than 350.
61
Testing the Population Mean When the
Population Standard Deviation is Known
Example 2
A new billing system for a department store will be
cost- effective only if the mean monthly account is
more than $170.
A sample of 400 accounts has a mean of $178.
If accounts are approximately normally distributed
with
o = $65, can we conclude that the new system will be
cost effective?
62
Example 2 Solution
The population of interest is the credit accounts at
the store.
We want to know whether the mean account for all
customers is greater than $170.
H
1
: > 170
The null hypothesis must specify a single value
of the parameter ,
H
0
: = 170
Testing the Population Mean (o is Known)
63
Approaches to Testing
There are two approaches to test whether the
sample mean supports the alternative
hypothesis (H
1
)
The rejection region method is mandatory for
manual testing (but can be used when testing is
supported by a statistical software)
The p-value method which is mostly used when a
statistical software is available.
64
The rejection region is a range of values such
that if the test statistic falls into that range,
the null hypothesis is rejected in favor of the
alternative hypothesis.
The Rejection Region Method
65
Example 2 solution continued

Recall: H
0:
= 170
H
1
: > 170
therefore,

It seems reasonable to reject the null hypothesis and
believe that > 170 if the sample mean is sufficiently large.

for a Right - Tail Test
66
Example 2 solution continued

Define a critical value for that is just large enough
to reject the null hypothesis.
x
L
x

Reject the null hypothesis if
L
x x >
for a Right - Tail Test
67

Instead of using the statistic , we can use the
standardized value z.

Then, the rejection region becomes
x
n
x
z
o

=
o
> z z
One tail test
The standardized test statistic
68
Example 2 - continued
We redo this example using the standardized test
statistic.
Recall: H
0
: = 170
H
1
: > 170
Test statistic:

Rejection region: z > z
.05
= 1.645.
46 . 2
400 65
170 178
n
x
z =
=
o

=
69
645 . 1 Z
if hypothesis null the ject Re
>
Conclusion
Since Z = 2.46 > 1.645, reject the null
hypothesis in favor of the alternative
hypothesis.
70
The p-value provides information about the amount of
statistical evidence that supports the alternative
hypothesis.
The p-value of a test is the probability of observing a
test statistic at least as extreme as the one computed,
given that the null hypothesis is true.

Let us demonstrate the concept on Example 2
P-value Method
71
Describing the p-value
If the p-value is less than 1%, there is overwhelming
evidence that supports the alternative hypothesis.
If the p-value is between 1% and 5%, there is a
strong evidence that supports the alternative
hypothesis.
If the p-value is between 5% and 10% there is a
weak evidence that supports the alternative
hypothesis.
If the p-value exceeds 10%, there is no evidence
that supports the alternative hypothesis.
Interpreting the p-value
72

If we reject the null hypothesis, we conclude that
there is enough evidence to infer that the alternative
hypothesis is true.

If we do not reject the null hypothesis, we conclude
that there is not enough statistical evidence to infer
that the alternative hypothesis is true.
The alternative hypothesis
is the more important
one. It represents what
we are investigating.
Conclusions of a Test of Hypothesis
73
A Left - Tail Test
The SSA Envelop Example.
The chief financial officer in FedEx believes that
including a stamped self-addressed (SSA) envelop
in the monthly invoice sent to customers will
decrease the amount of time it take for customers to
pay their monthly bills.
Currently, customers return their payments in 24
days on the average, with a standard deviation of 6
days.
74
The SSA envelop example continued
It was calculated that an improvement of two days on the
average will cover the costs of the envelops (checks can
be deposited earlier).
A random sample of 220 customers was selected and SSA
envelops were included with their invoice packs.
The times customers payments were received were
recorded
Can the CFO conclude that the plan will be profitable at
10% significance level?
A Left - Tail Test
75
The SSA envelop example Solution
The parameter tested is the population mean
payment period ().
The hypotheses are:
H
0
: = 22
H
1
: < 22 (The CFO wants to know whether the
plan will be profitable)

A Left - Tail Test
76
The SSA envelop example Solution continued
The standardized one tail left hand test is:
A Left -Tail Test
28 . 1
10 .
= = < z z z
o
91 .
220 6
22 63 . 21
=
=
n
x
z
o
Since -.91 > 1.28 do not reject the null hypothesis.

The p value = P(Z<-.91) = .1814
Since .1814 > .10, do not reject the null hypothesis
Define the rejection region
77
A Two - Tail Test
Example 2
AT&T has been challenged by competitors who
argued that their rates resulted in lower bills.
A statistics practitioner determines that the mean
and standard deviation of monthly long-distance bills
for all AT&T residential customers are $17.09 and
$3.87 respectively.
78
A Two - Tail Test
A random sample of 100 customers is selected and
customers bills recalculated using a leading
competitors rates
Assuming the standard deviation is the same (3.87),
can we infer that there is a difference between
AT&Ts bills and the competitors bills (on the
average)?
79
Solution
Is the mean different from 17.09?
H
0
: = 17.09
09 . 17 : H
1
=
Define the rejection region

A Two - Tail Test
2 / 2 / o o
z z or z z > s
80
17.09
We want this erroneous
rejection of H
0
to be a rare
event, say 5% chance.
x x
If H
0
is true ( =17.09), can still fall far above
or far below 17.09, in which case we
erroneously reject H
0
in favor of H
1

x
) 09 . 17 ( =
o/2 = 0.025
o/2 = 0.025
Solution - continued
A Two Tail Test
81
o/2 = 0.025 o/2 = 0.025
19 . 1
100 87 . 3
09 . 17 55 . 17
=
=
n
x
z
o
-z
o/2
= -1.96 z
o/2
= 1.96
There is insufficient evidence to infer that there is a
difference between the bills of AT&T and the
competitor.
-1.19 1.19 0
A Two Tail Test
STEPS IN THE HYPOTHESIS-TESTING
PROCEDURE
Stating the null and alternative hypotheses
H
0
: = 5 000
Hypothesized value of population mean
H0

The conclusion which is accepted contingent on the
rejection of H
0
is known as the alternative hypothesis
H
1
: = 5 000 or > 5 000 or < 5 000
PROCEDURE
Stating the null and alternative hypotheses
Selecting the level of significance
criterion for rejection or acceptance of the null hypothesis
The minimum acceptable probability level is also the risk
of erroneously rejecting the null hypothesis when the null
hypothesis is true. This risk of erroneous rejection is
known as the level of significance, denoted by o
PROCEDURE
Null and alternative hypotheses
Selecting the level of significance
criterion for rejection or acceptance of the null hypothesis
The minimum acceptable probability level is also the risk
of erroneously rejecting the null hypothesis when the null
hypothesis is true. This risk of erroneous rejection is
known as the level of significance, denoted by o
PROCEDURE
Level of significance
Determining the test distribution to use
In the case of a single sample, we will be concerned only
with the normal Z distribution and the t distribution

PROCEDURE
Level of significance
Test distribution
Defining the rejection or critical regions
Once the appropriate test distribution has been
determined, it is then possible to specify in standard units
what a significant difference is
PROCEDURE
Test distribution
Critical region
Stating the decision rule
Accept H
0
if the standardized difference between sample
mean and
H0
falls into the acceptance region
Reject H
0
if the standardized difference between sample
mean and
H0
falls into a rejection region
x
PROCEDURE
Critical region
Decision rule
Making the necessary computations
Collect a sample of items
Estimate the parameter of interest
Compute the critical ratio CR (also known as the
standardized test statistic)
CR
x
H
x
=

o
0
PROCEDURE
Critical region
Decision rule
Necessary computations
Making a statistical decision
If the value of the critical ratio falls into a rejection region,
the null hypothesis is rejected

ECONOMETRICS BASICS

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ECONOMETRICS BASICS

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1

Inference About a Population

Since -.91 > 1.28 do not reject the null hypothesis.

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