DEFINITION of 'Confidence Interval'
A term used in inferential statistics that measures the probability that a population parameter will fall between two set values. The confidence interval can take any number of probabilities, with the most common being 95% or 99%.
Next Up
BREAKING DOWN 'Confidence Interval'
In other words, a confidence interval is the probability that a value will fall between an upper and lower bound of a probability distribution. For example, given a 99% confidence interval, stock XYZ's return will fall between 6.7% and +8.3% over the next year. In layman's terms, we are 99% confident that the return's of holding XYZ stock over the next year will fall between 6.7% and +8.3%.
RELATED TERMS

Probability Distribution
A statistical function that describes all the possible values ... 
NonSampling Error
A statistical error caused by human error to which a specific ... 
Sampling Error
A statistical error to which an analyst exposes a model simply ... 
Normal Distribution
A probability distribution that plots all of its values in a ... 
A Priori Probability
Probability calculated by logically examining existing information. ... 
Tail Risk
A form of portfolio risk that arises when the possibility that ...
Related Articles

Fundamental Analysis
Find The Right Fit With Probability Distributions
Discover a few of the most popular probability distributions and how to calculate them. 
Mutual Funds & ETFs
5 Ways To Measure Mutual Fund Risk
These statistical measurements highlight how to mitigate risk and increase rewards. 
Bonds & Fixed Income
Find The Highest Returns With The Sharpe Ratio
Learn how to follow the efficient frontier to increase your chances of successful investing. 
Investing Basics
5 Tips For Diversifying Your Portfolio
A diversified portfolio will protect you in a tough market. Get some solid tips here! 
Entrepreneurship
Identifying And Managing Business Risks
There are a lot of risks associated with running a business, but there are an equal number of ways to prepare for and manage them. 
Forex Education
Explaining Uncovered Interest Rate Parity
Uncovered interest rate parity is when the difference in interest rates between two nations is equal to the expected change in exchange rates. 
Fundamental Analysis
Using Decision Trees In Finance
A decision tree provides a comprehensive framework to review the alternative scenarios and consequences a decision may lead to. 
Economics
Understanding Tragedy of the Commons
The tragedy of the commons describes an economic problem in which individuals try to reap the greatest benefits from a given resource. 
Investing
What’s the Difference Between Duration & Maturity?
We look at the meaning of two terms that often get confused, duration and maturity, to set the record straight. 
Fundamental Analysis
Return on Investment (ROI) Vs. Internal Rate of Return (IRR)
Read about the similarities and differences between an investment's internal rate of return (IRR) and its return on investment (ROI).
RELATED FAQS

What's the difference between a confidence level and a confidence interval in Value ...
The value at risk (VaR) uses both the confidence level and confidence interval. A risk manager uses the VaR to monitor and ... Read Full Answer >> 
What does Value at Risk (VaR) say about the "tail" of the loss distribution?
The value at risk (VaR) is a statistical measure that assesses, with a degree of confidence, the financial risk associated ... Read Full Answer >> 
What's the difference between EaR, Value at Risk (VaR), and EVE?
Earnings at risk (EaR), value at risk (VaR) and economic value of equity (EVE) are measures used to assess potential value ... Read Full Answer >> 
How can you calculate Value at Risk (VaR) in Excel?
Value at risk (VAR) is a technique used in risk management to measure and quantify the amount of risk associated with an ... Read Full Answer >> 
Is Colombia an emerging market economy?
Colombia meets the criteria of an emerging market economy. The South American country has a much lower gross domestic product, ... Read Full Answer >> 
What assumptions are made when conducting a ttest?
The common assumptions made when doing a ttest include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>