Statistical Significance

AAA

DEFINITION of 'Statistical Significance'

A result that is not likely to occur randomly, but rather is likely to be attributable to a specific cause. Statistical significance can be strong or weak, and is important to research in many math- and science-related fields, including medicine, sociology, psychology and biology. Statistical significance does not always indicate practical significance. In addition, it can be misinterpreted when researchers do not use language carefully in reporting their results.

INVESTOPEDIA EXPLAINS 'Statistical Significance'

The calculation of statistical significance (significance testing) is subject to a certain degree of error. The researcher must define in advance the probability of a sampling error (which exists in any test that does not include the entire population). Sample size is an important component of statistical significance in that larger samples are less prone to flukes. Only random, representative samples should be used in significance testing.



The level at which one can accept whether an event is statistically significant is known as the significance level or p-value.

RELATED TERMS
  1. P-Test

    A statistical method used to test one or more hypotheses within ...
  2. Representative Sample

    A subset of a statistical population that accurately reflects ...
  3. Stepwise Regression

    The step-by-step iterative construction of a regression model ...
  4. Nonparametric Statistics

    A statistical method wherein the data is not required to fit ...
  5. Sampling Error

    A statistical error to which an analyst exposes a model simply ...
  6. Descriptive Statistics

    A set of brief descriptive coefficients that summarizes a given ...
Related Articles
  1. Investing Basics

    What Are The Odds Of Scoring A Winning Trade?

    Just because you're on a winning streak doesn't mean you're a skilled trader. Find out why.
  2. Investing Basics

    Regression Basics For Business Analysis

    This tool is easy to use and can provide valuable information on financial analysis and forecasting. Find out how.
  3. Active Trading

    The Linear Regression Of Time and Price

    This investment strategy can help investors be successful by identifying price trends while eliminating human bias.
  4. Fundamental Analysis

    What is a Null Hypothesis?

    In statistics, a null hypothesis is assumed true until proven otherwise.
  5. 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 ...
  6. Fundamental Analysis

    Lognormal and Normal Distribution

    When and why do you use lognormal distribution or normal distribution for analyzing securities? Lognormal for stocks, normal for portfolio returns.
  7. Investing Basics

    Using Normal Distribution Formula To Optimize Your Portfolio

    Normal or bell curve distribution can be used in portfolio theory to help portfolio managers maximize return and minimize risk.
  8. Technical Indicators

    The Normal Distribution Table, Explained

    The normal distribution formula is based on two simple parameters - mean and standard deviation
  9. Economics

    Can Investors Trust Official Statistics?

    The official statistics in some countries need to be taken with a grain of salt. Find out why you should be skeptical.
  10. Investing Basics

    R-Squared

    Learn more about this statistical measurement used to represent movement between a security and its benchmark.

You May Also Like

Hot Definitions
  1. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  2. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  3. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  4. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  5. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  6. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
Trading Center