Chi Square Test: Introduction, How to calculate, When to use, Properties

Varying statistical methods are used in data analysis to determine the accuracy of observed or expected data. The need to go by the statistical approach is to determine whether the data predicted is actually true or not. Among different kinds of methodologies present, one of the most important tests that help us distinguish between the predicted value versus the actual value is the chi square. 

In this article, we’ll discuss the important terms covered under the chi square test. Besides that, we’ll also look at its properties and limitations. 

What is Hypothesis Testing?

Hypothesis testing is a common statistical approach where the data analyst tests an assumption related to the population parameter. In other words, it is a technique for drawing a conclusion about a set of populations based on the sample data. With the help of hypothesis testing, we can determine which sample data is best suited for the distinct population. 

Data analysts use a random set of populations to test the two hypotheses: Null hypothesis and Alternative hypothesis. 

• The Null hypothesis is the equality between parameters. It may state that the population mean return is zero. It is an assumption that states that the event has never occurred. The symbol that represents the null hypothesis is H0 (aka H naught)
• The Alternative hypothesis is the opposite of the null hypothesis, which means that the population mean return is not zero. The symbol that represents the alternative hypothesis is H1. 

Since these two hypotheses are the exact opposite of each other, they cannot co-exist, and one of them will always be true. 

What are Categorical Variables?

Categorical variables, as the name signifies, is the variable that can be categorized into different (two or more) categories with no intrinsic ordering. These variables are qualitative as they determine a variable’s quality or characteristics. Categorical variables are of two kinds-

1. Nominal variable- It uses names, labels, or any specific attributes that must be measured. It measures the quality features of the category and has no intrinsic ordering. For example, gender, name, blood group, etc.
2. Ordinal variable- It uses values with an order or rank. It allows the categories to be sorted by assigning numbers. However, there’s no standard ordering in the ordinal variable. For example, customer satisfaction– very satisfied, satisfied, good, not satisfied.

What is a Chi-Square Test?

Chi square is a statistical procedure that analyzes the data based on observations on a random sample. It compares the two data sets that determine the actual value versus the expected value by correlating the categorical variables. 

It helps determine the likelihood of the data, which means whether any assumption of the null hypothesis is actually true or not. 

Formula to determine the chi square test:

Where X2 is the degree of freedom which varies in calculations. 

A chi square test helps to compare the observed data with the expected data. It is the perfect statistical approach to elucidate the connection between two or more variables. One point to be noted is that the chi square data is only applicable to categorical data, for example, gender, age, height, etc. 

Learn Machine Learning Online Courses from the World’s top Universities. Earn Masters, Executive PGP, or Advanced Certificate Programs to fast-track your career.

Chi-Square Distribution

The chi-square distribution determines whether the null hypothesis speculation is true or not. It states the notable difference between normal and observed frequencies in one or more categorical variables. 

Finding P-value

P is the probability here, and chi-square helps determine the probability of independent variables. There are different values of P with different interpretations.

• P≤ 0.05; Hypothesis Rejected
• P>.05; Hypothesis Accepted

Probability is based on chance or uncertainty. It determines the possibility of an outcome likely to happen. In terms of statistics, probability handles the complexity of data. How we use different technical approaches to get to the data is measured by probability. It involves collecting, organizing, interpreting, presenting, and analyzing data. 

Types of Chi-Square Test

There are two types of chi-square tests. These are as follows:-

The Test of Independence

Also known as inferential statistics, this test determines whether the variable is comparable or not. It means that the two variables picked for statistical analysis should be related to each other. For example, we have to determine the number of votes of a political party by the gender of the population. In that case, these two categories are not related to each other (aka null hypothesis) because the number of votes has nothing to do with the gender of the audience. 

The independence test is performed when we have value counts for categorical variables, and this test is considered a non-parametric test. 

The Goodness of Fit Test

The goodness of fit statistical approach requires a set of data on which the test has to be performed. We can implement this test when we have value counts for categorical variables. 

For example, we have three different sets of pens in three boxes. Each box should contain an equal number of different colored pens in each box. By the goodness of fit, we can test whether each box contains the same number of pens of each color. The number of pens in each color must be the same. 

How to calculate the chi-square?

Let’s understand this with the help of an example, including a chi square table.

Suppose we have incidences of water-borne diseases in three regions. So,

Going by the chi-square formula, we have:-

Therefore,

The chi-square value will be = 125.516

Where is Chi-Square Used?

The chi-square test is useful for analyzing the cross-tabulations of surveys or data. Cross-tabulations determine the frequency and percentage of respondents to each question. This data can be categorized into various segments (such as gender, age, education, preference, etc.). The chi-square test determines whether there’s a difference between the categories of these data or not. 

You can simply view it as research work performed by data analysts as they study a survey. They apply categorical variables, P-values, hypothesis tests, and many other elements to study the data thoroughly. 

When is the chi-square test used?

Some common examples where chi-square tests can be used are– dog breeds, genres of movies, educational levels, the ratio of males and females, the number of votes, and many more. The data is obtained by conducting a survey based on numerous questions. These questions help us analyze the data. 

Properties of Chi Square Test

Here are some of the properties of chi-square distribution:-

1. It is a probability distribution that ranges from 0 to infinity in a positive direction. The value of χ2 can never be negative.
2. The shape of the chi-square in a graph depends on the number of degrees of freedom, which is V. When V is small, the shape is likely to be skewed to the right. If the shape of V gets larger, the graph becomes more symmetrical. 
3. The mean of the chi-square distribution is equal to the degrees of freedom.
4. If we multiply the number of degrees of freedom by two, we get the value that would be equal to the variance.

Limitations of the Chi Square Test

One of the biggest limitations of the chi-square is the sample size requirements. The test is challenging to interpret when there’s a large number of categories. When a large number of data is used in statistical analysis, the insignificant relationships become significant, which may or may not hold any meaning to them.

Another limitation of the chi-square test is it is only applicable to two related variables. It requires a detailed analysis to establish the casualty in a relationship if there is any. 

Strengthen your Machine Learning skills with upGrad

The scope of artificial intelligence and machine learning is increasing every year. Students are getting plenty of opportunities to expand their scope. These amazing opportunities should be enough to motivate candidates to pursue one of these choices as their career path. 

upGrad offers Executive PG Program in Machine Learning and Artificial Intelligence, which can be the perfect choice to boost your career. This program is tailored specifically for tech geeks by IIIT-B who want to upskill themselves to bag their dream data analyst role. The expert-led curriculum offers proficiency in topics such as exploratory data analytics, natural language processing, AI strategy, and more, making it one of the best in the industry.

Conclusion

The chi-square test offers ease of computation and a flexible data processing approach, making it one of the finest ways of data analysis. Its significant implementation in machine learning and data science domains makes it an essential concept to hone proficiency in if you are interested in the relevant field.