Hypothesis Testing

What is 'Hypothesis Testing'

Hypothesis testing is a process by which an analyst tests a statistical hypothesis. The methodology employed by the analyst depends on the nature of the data used, and the goals of the analysis. The goal is to either accept or reject the null hypothesis.

BREAKING DOWN 'Hypothesis Testing'

Hypothesis testing is used to infer a result of a hypothesis performed on sample data from a larger population. For example, performing a hypothesis test on sample data in an attempt to determine the mean of a population is the same as the mean of the sample.

RELATED TERMS
  1. Null Hypothesis

    A type of hypothesis used in statistics that proposes that no ...
  2. Type II Error

    A statistical term used within the context of hypothesis testing ...
  3. Alpha Risk

    The risk in a statistical test that a null hypothesis will be ...
  4. Type I Error

    A type of error that occurs when a null hypothesis is rejected ...
  5. Beta Risk

    The probability that a false null hypothesis will be accepted ...
  6. Two-Tailed Test

    A statistical test in which the critical area of a distribution ...
Related Articles
  1. Active Trading Fundamentals

    Hypothesis Testing in Finance: Concept & Examples

    When you're indecisive about an investment, the best way to keep a cool head might be test various hypotheses using the most relevant statistics.
  2. Fundamental Analysis

    What is a Null Hypothesis?

    In statistics, a null hypothesis is assumed true until proven otherwise.
  3. Term

    How Statistical Significance is Determined

    If something is statistically significant, it’s unlikely that it happened by chance.
  4. Investing

    What's a T-Test?

    T-Test is a term from statistics that allows for the comparison of two data populations and their means. The test is used to see if the two sets of data are significantly different from one another. ...
  5. Economics

    Efficient Market Hypothesis

    An investment theory that states it is impossible to "beat the market".
  6. Active Trading Fundamentals

    Efficient Market Hypothesis: Is The Stock Market Efficient?

    Deciding whether it's possible to attain above-average returns requires an understanding of EMH.
  7. Fundamental Analysis

    How Does Sampling Work?

    Sampling is a term used in statistics that describes methods of selecting a pre-defined representative number of data from a larger data population.
  8. Economics

    Investopedia Explains Fractal Markets Theory

    Fractal Market Hypothesis has emerged as an alternative to longstanding economic theories due to its ability to explain investor behavior during crises.
  9. Economics

    What is Systematic Sampling?

    Systematic sampling is similar to random sampling, but it uses a pattern for the selection of the sample.
  10. Fundamental Analysis

    Explaining Standard Error

    Standard error is a statistical term that measures the accuracy with which a sample represents a population.
RELATED FAQS
  1. What does a strong null hypothesis mean?

    Find out what null hypothesis is and why it is important to the scientific method. See how statisticians and economists use ... Read Answer >>
  2. What is the relationship between confidence inferrals and a null hypothesis?

    Learn about the relationship between confidence intervals and the null hypothesis in scientific research and empirical experimentation. Read Answer >>
  3. Has the Efficient Market Hypothesis been proven correct or incorrect?

    Explore the efficient market hypothesis and understand the extent to which this theory and its conclusions are correct or ... Read Answer >>
  4. What are the differences between weak, strong and semi-strong versions of the Efficient ...

    Discover how the efficient market theory is broken down into three versions, the hallmarks of each and the anomalies that ... Read Answer >>
  5. What are the primary assumptions of Efficient Market Hypothesis?

    Find out about the key assumptions behind the efficient market hypothesis (EMH), its implications for investing and whether ... Read Answer >>
  6. What does the efficient market hypothesis assume about fair value?

    Found out what the efficient market hypothesis says about the fair value of securities, and learn why technical and fundamental ... Read Answer >>
Hot Definitions
  1. Physical Capital

    Physical capital is one of the three main factors of production in economic theory. It consists of manmade goods that assist ...
  2. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  3. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  4. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  5. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
Trading Center