Statistical Significance

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.


Filed Under:

comments powered by Disqus
Hot Definitions
  1. Yield Burning

    The illegal practice of underwriters marking up the prices on bonds for the purpose of reducing the yield on the bond. This practice, referred to as "burning the yield," is done after the bond is placed in escrow for an investor who is awaiting repayment.
  2. Marginal Analysis

    An examination of the additional benefits of an activity compared to the additional costs of that activity. Companies use marginal analysis as a decision-making tool to help them maximize their profits. Individuals unconsciously use marginal analysis to make a host of everyday decisions. Marginal analysis is also widely used in microeconomics when analyzing how a complex system is affected by marginal manipulation of its comprising variables.
  3. Treasury Inflation Protected Securities - TIPS

    A treasury security that is indexed to inflation in order to protect investors from the negative effects of inflation. TIPS are considered an extremely low-risk investment since they are backed by the U.S. government and since their par value rises with inflation, as measured by the Consumer Price Index, while their interest rate remains fixed.
  4. Gilt-Edged Switching

    The selling and repurchasing of certain high-grade stocks or bonds to capture profits. Gilt-edged switching involves gilt-edged security, which can be high-grade stock or bond issued by a financially stable company such as the Blue Chip companies or by certain governments.
  5. Master Limited Partnership - MLP

    A type of limited partnership that is publicly traded. There are two types of partners in this type of partnership: The limited partner is the person or group that provides the capital to the MLP and receives periodic income distributions from the MLP's cash flow, whereas the general partner is the party responsible for managing the MLP's affairs and receives compensation that is linked to the performance of the venture.
  6. Class Action

    An action where an individual represents a group in a court claim. The judgment from the suit is for all the members of the group (class).
Trading Center