Category: Level I

There are eight articles on hypothesis testing: Synopsis Step 1: State the hypotheses Step 2: Select the appropriate test statistic (you are here) Step 3: Specify the level of significance Step 4: State the decision rule for testing the null hypothesis Step 5: Collect the sample data and calculate the value of the test statistic…

There are eight articles on hypothesis testing: Synopsis Step 1: State the hypotheses (you are here) Step 2: Select the appropriate test statistic Step 3: Specify the level of significance Step 4: State the decision rule for testing the null hypothesis Step 5: Collect the sample data and calculate the value of the test statistic…

Before reading this article, make sure that you have read the article on probability distributions in general. The normal (or Gaussian) probability distribution is arguably the most important continuous distribution used in probability and statistics; it is certainly the most important continuous probability distribution appearing in the CFA curriculum.  There are several reasons for its…

Before reading this article, make sure that you have read the article on probability distributions in general. The Student’s t-distribution has an interesting history.  It was developed by a gentleman who worked for Guinness Breweries in Dublin, Ireland, who used it for statistical tests on the ingredients for Guinness beer; apparently Guinness preferred that their…

A confidence interval is nothing more than a range in which we hope (and, with some probability, expect) some value to lie.  For our purposes, the values for which we will construct confidence intervals will be parameters for probability distributions.  Specifically, we’ll construct confidence intervals for: The mean of a (given) probability distribution (population) An…