Page 20 - FINAL CFA SLIDES DECEMBER 2018 DAY 4

Session Unit 3:

12. Hypothesis Testing, p274

LOS 12.a: Define a hypothesis, describe the steps of hypothesis testing, and describe

and interpret the choice of the null and alternative hypotheses.

A hypothesis is a statement about the value of a population parameter developed for the

purpose of testing a theory or belief e.g. the mean daily returns of shares is positive!

Key steps, p.273: The Null (Ho) & Alternative Hypothesis (Ha)

Ho = the one the researcher wants to reject.

Say, μ is the population mean and μ0 is the
hypothesized value of the population mean.
Ho: μ = μo,
Ho: μ ≤ μo,
Ho: μ ≥ μ0,

Ha = the conclusion reached if we reject Ho.

Ha: μ ≠ μo,
Ha: μ > μ0,
Ha: μ < μo,

The logic?

Since you can never really prove anything with

statistics, when Ho is discredited, the implication is that
the Ha is valid/supported (note: not accepted).