P-Value

DEFINITION of 'P-Value'

The level of marginal significance within a statistical hypothesis test, representing the probability of the occurrence of a given event. The p-value is used as an alternative to rejection points to provide the smallest level of significance at which the null hypothesis would be rejected. The smaller the p-value, the stronger the evidence is in favor of the alternative hypothesis.

P-values are calculated using p-value tables, or spreadsheet/statistical software.

BREAKING DOWN 'P-Value'

Because different researchers use different levels of significance when examining a question, a reader may sometimes have difficulty comparing results from two different tests.

For example, if two studies of returns from two particular assets were done using two different significance levels, a reader could not compare the probability of returns for the two assets easily. For ease of comparison, researchers will often feature the p-value in the hypothesis test and allow the reader to interpret the statistical significance themselves. This is called a p-value approach to hypothesis testing.

RELATED TERMS
  1. P-Test

    A statistical method used to test one or more hypotheses within ...
  2. T-Test

    A statistical examination of two population means. A two-sample ...
  3. Bonferroni Test

    A type of multiple comparison test used in statistical analysis. ...
  4. Statistics

    A type of mathematical analysis involving the use of quantified ...
  5. Stochastic Modeling

    A method of financial modeling in which one or more variables ...
  6. Binomial Distribution

    A probability distribution that summarizes the likelihood that ...
Related Articles
  1. Personal Finance

    Does Your Investment Manager Measure Up?

    These key stats will reveal whether your advisor is a league leader or a benchwarmer.
  2. Investing Basics

    10 Books Worth Investing In

    Here are 10 financial services books that are informative and useful.
  3. Mutual Funds & ETFs

    5 Ways To Measure Mutual Fund Risk

    These statistical measurements highlight how to mitigate risk and increase rewards.
  4. 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.
  5. Active Trading Fundamentals

    Bet Smarter With The Monte Carlo Simulation

    This technique can reduce uncertainty in estimating future outcomes.
  6. Fundamental Analysis

    Scenario Analysis Provides Glimpse Of Portfolio Potential

    This statistical method estimates how far a stock might fall in a worst-case scenario.
  7. Term

    How Market Segments Work

    A market segment is a group of people who share similar qualities.
  8. Active Trading

    Market Efficiency Basics

    Market efficiency theory states that a stock’s price will fully reflect all available and relevant information at any given time.
  9. Fundamental Analysis

    5 Basic Financial Ratios And What They Reveal

    Understanding financial ratios can help investors pick strong stocks and build wealth. Here are five to know.
  10. Investing

    What Investors Need to Know About Returns in 2016

    Last year wasn’t a great one for investors seeking solid returns, so here are three things we believe all investors need to know about returns in 2016.
RELATED FAQS
  1. What is finance?

    "Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Full Answer >>
  2. What is the difference between positive and normative economics?

    Positive economics is objective and fact based, while normative economics is subjective and value based. Positive economic ... Read Full Answer >>
  3. Do plane tickets get cheaper closer to the date of departure?

    The price of flights usually increases one month prior to the date of departure. Flights are usually cheapest between three ... Read Full Answer >>
  4. 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 >>
  5. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  6. What is the utility function and how is it calculated?

    In economics, utility function is an important concept that measures preferences over a set of goods and services. Utility ... Read Full Answer >>
Hot Definitions
  1. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  2. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  3. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  4. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  5. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
Trading Center