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Statistical tests for graduation.

0 votes
asked Jun 17 in BUS 3018F - Models by Laugh Out Loud (140 points)
edited Jun 17 by joshua_wort

I want to know whether we need to apply continuity correction when we use normal approximation to carry out a statistical test. Continuity correction is applied in ActEd but not mentioned at all in lecture slides.

For example, in a sign test, if the no. of positive \(Z_x\) is P which is greater than \(0.5*m\) (no. of age groups). Thus we want to test whether P is too large and we use normal approximation to do so.

The test statistic should be \(\frac{P-0.5m}{0.5\sqrt{m}}\) or \(\frac{P-0.5-0.5m}{0.5\sqrt{m}}\) (i.e. continuity correction)

Just want to be sure since it is not mentioned in the lecture slides.

1 Answer

+1 vote
answered Jun 17 by joshua_wort (1,390 points)

If you use a normal approximation, then you should use a continuity correction, if the number of age groups is not large enough (\(\lt 20\)).