Statistically Significant

AAA

DEFINITION of 'Statistically Significant'

The likelihood that a result or relationship is caused by something other than mere random chance. Statistical hypothesis testing is traditionally employed to determine if a result is statistically significant or not. This provides a "p-value" representing the probability that random chance could explain the result. In general, a 5% or lower p-value is considered to be statistically significant.

INVESTOPEDIA EXPLAINS 'Statistically Significant'

This concept may sound confusing and impractical, but consider a simple example - suppose you work for a company that produces running shoes:

You need to plan production for the number of pairs of shoes your company should make in each size for men and for women. You don't want to base your production plans on the anecdotal evidence that men usually have bigger feet than women, you need hard data to base your plans on. Therefore, you should look at a statistical study that shows the correlation between gender and foot size.

If the report's p-value was only 2%, this would be a statistically significant result. You could reasonably use the study's data to prepare your company's production plans, because the 2% p-value indicates there is only a 2% chance that the connection between foot size and gender was the result of chance/error. On the other hand, if the p-value was 20%, it would not be reasonable to use the study as a basis for your production plans, since there would be a 20% chance that the relationship presented in the study could be due to random chance alone.

RELATED TERMS
  1. Bonferroni Test

    A type of multiple comparison test used in statistical analysis. ...
  2. Residual Standard Deviation

    A statistical term used to describe the standard deviation of ...
  3. Sample Selection Bias

    A type of bias caused by choosing non-random data for statistical ...
  4. Correlation

    In the world of finance, a statistical measure of how two securities ...
  5. Dispersion

    A statistical term describing the size of the range of values ...
  6. Covariance

    A measure of the degree to which returns on two risky assets ...
Related Articles
  1. Markets

    Using Historical Volatility To Gauge Future Risk

    Use these calculations to uncover the risk involved in your investments.
  2. Forex Education

    Commodity Prices And Currency Movements

    Find out which currencies are most affected by fluctuations in gold and oil prices, and improve your trading.
  3. Forex

    What is the correlation between American stock prices and the value of the U.S. dollar?

    The correlation between any two variables (or sets of variables) summarizes a relationship, whether or not there is any real-world connection between the two variables. The correlation coefficient ...
  4. Forex Education

    Using Currency Correlations To Your Advantage

    Knowing the relationships between pairs can help control risk exposure and maximize profits.
  5. Options & Futures

    Financial Concepts

    Diversification? Optimal portfolio theory? Read this tutorial and these and other financial concepts will be made clear.
  6. Fundamental Analysis

    What is the affect of the invisible hand on consumers?

    Discover how consumers help initiate and benefit from the invisible hand of the market, which naturally coordinates trade in an exchange economy.
  7. Economics

    How does the invisible hand phenomenon affect investment markets?

    Read about how the invisible hand of the market coordinates investment markets and provides social benefit and why its effects are distorted along the way.
  8. Fundamental Analysis

    What are some examples of economies of scale?

    Take a look at different examples of economies of scale, including how marginal costs can be reduced through external and internal factors.
  9. Fundamental Analysis

    How can quantitative easing be effective in the economy?

    Take a deeper look at the impacts of the Federal Reserve's large scale asset purchase plan, better known as quantitative easing, or QE.
  10. 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.

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