Hypothesis Testing

AAA

DEFINITION of 'Hypothesis Testing'

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.

INVESTOPEDIA EXPLAINS '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. Balanced ANOVA

    A statistical test used to determine whether or not different ...
  2. Beta Risk

    The probability that a false null hypothesis will be accepted ...
  3. One-Tailed Test

    A statistical test in which the critical area of a distribution ...
  4. Two-Tailed Test

    A statistical test in which the critical area of a distribution ...
  5. Sampling Error

    A statistical error to which an analyst exposes a model simply ...
  6. Null Hypothesis

    A type of hypothesis used in statistics that proposes that no ...
Related Articles
  1. Economics

    Where do funds report their r-squared?

    Learn where to find R-squared calculations for mutual funds. Explore R-squared, Alpha and Beta and how these calculations measure securities' performance.
  2. Fundamental Analysis

    How do you calculate r-squared in Excel?

    Calculate R-squared in Microsoft Excel by creating two data ranges to correlate. Use the Correlate formula to correlate both sets of data, or x and y.
  3. Fundamental Analysis

    What are the most common issues with Serial Correlation in stocks?

    Read about the concept of serial correlation in stock returns, and learn why market analysts are divided about the efficacy of trading based on stock patterns.
  4. Bonds & Fixed Income

    How do I calculate yield to maturity of a zero coupon bond?

    Find out how to calculate the yield to maturity for a zero coupon bond, and see why this calculation is more simple than a bond with a coupon.
  5. Trading Strategies

    How far back in a stock's history should you go when gauging its volatility?

    Discover why it can be difficult for investors to figure out how far back to go into a stock's history when gauging its volatility.
  6. Fundamental Analysis

    What does the term 'invisible hand' refer to in the economy?

    Discover and understand the concept of the "invisible hand" as explained by Adam Smith, considered the founder of modern economic theory.
  7. Fundamental Analysis

    At what level is the current account deficit considered excessive, in terms of percent?

    Take a deeper look at the variables that impact current account deficits, and learn why not all types of deficits have equal impacts on a nation's economy.
  8. Trading Strategies

    What are common examples of Serial Correlation in finance?

    Take a deeper look at serial correlation in finance, and find out why most attempts at discovering serial correlation among asset prices have failed.
  9. Fundamental Analysis

    What is the difference between yield and rate of return?

    Read about the differences between yield and rate of return. See why many novice investors often struggle more with the concept of yield.
  10. Investing

    How to Use Stratified Random Sampling

    Stratified random sampling is a technique best used with a sample population easily broken into distinct subgroups. Samples are then taken from each subgroup based on the ratio of the subgroup’s ...

You May Also Like

Hot Definitions
  1. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  2. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  3. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  4. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  5. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  6. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
Trading Center