Page 28 - FINAL CFA SLIDES DECEMBER 2018 DAY 4
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LOS 12.d: Explain a decision rule, the POT, Session Unit 3:
and the relation between CI and HT, p. 281
12. Hypothesis Testing
Key observations, p.282
Say, lets reduce SL!
Sample size and the choice of SL,
p (Type I Error) determines p(Type II Error) and
determines POT.
Meaning what?
+SL = + p of Rejecting a True Ho = + p (Type 1)
-SL = + p of Failing to Reject False Ho = + p (Type II) = - POT! For a given sample size,
For a given SL, we can - p (Type II) and + POT How do we + POT?
ONLY by increasing sample size!
- P (Reject) when True = - p (Type 1) - P (Reject) when True = - p (Type 1)
