Page 15 - FINAL CFA II SLIDES JUNE 2019 DAY 2

MODULE 7.3: HYPOTHESIS TESTS AND CONFIDENCE INTERVALS

EXAMPLE: Hypothesis test for significance of regression coefficients: The estimated slope coefficient from the ABC example is 0.64
with a standard error equal to 0.26. Assuming that the sample has 36 observations, determine if the estimated slope coefficient is
significantly different than zero at a 5% level of significance.

The critical two-tailed t-values are
± 2.03 (from the t-table with
df = 36 – 2 = 34).

• Because t > t critical (i.e., 2.46 > 2.03), we reject the null hypothesis and conclude that the slope is different from zero.
• Note that the t-test and the confidence interval lead to the same conclusion to reject Ho and conclude that the slope coefficient is
statistically significant.