Page 31 - FINAL CFA SLIDES DECEMBER 2018 DAY 4
P. 31
Session Unit 3:
12. Hypothesis Testing
LOS 12.e: Distinguish between a statistical result and an economically meaningful result, p283
Statistically significant result Economically significance considerations!
Say you reject Ho and hence support Ha • Transaction costs
that 20 year returns to a strategy are +ve. • Taxes
• Risk
Do you execute the strategy?
LOS 12.f: Explain and interpret the p-value as it relates to hypothesis testing, p.284
Say a 2TT at 5% SL where z
test statistic is 2.3 i.e. >1.96. Per Z-table, p. value > Z (= 2.3) is (1 – 0.9893) = 1.07%.
Since it’s a 2TT, our p-value is 2 × 1.07 = 2.14%,
P-value is the smallest SL for which the The p of obtaining a test
hypothesis would be rejected. statistic that would lead
to a rejection of Ho,
assuming it is true!
Meaning what?
At a 3% (1.5% for 2TT), 4%, or 5% SL, we would reject
Ho, but at a 2% or 1% SL we would not.
