Investopedia

Continue to Site »

Statistically Significant

Filed Under » ,
Dictionary Says

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 Says

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.

Articles Of Interest

  1.

    Commodity Prices And Currency Movements

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

  2. 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 ...

  3. Using Historical Volatility To Gauge Future Risk

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

  4. Using Currency Correlations To Your Advantage

    Knowing the relationships between pairs can help control risk exposure and maximize profits.

  5. Financial Concepts

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

  6. Quants: The Rocket Scientists Of Wall Street

    Blend math, finance and computer skills to command a high - and well deserved - salary.

  7. 5 ETFs Flaws You Shouldn't Overlook

    Despite their popularity, exchange traded funds have some drawbacks that investors should know about.

  8. Using The Price-To-Book Ratio To Evaluate Companies

    The P/B ratio can be an easy way to determine a company's value, but it isn't magic!

  9. Liquidity Vs. Solvency

    Learn about the differences between these two words and how each one is used in the stock market.

  10. Calculating The Means

    Learn more about the different ways you can calculate your portfolio's average return.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  2. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.

  3. Cost-Push Inflation

    A phenomenon in which the general price levels rise (inflation) due to increases in the cost of wages and raw materials.

  4. Happiness Economics

    The formal academic study of the relationship between individual satisfaction and economic issues, such as employment and wealth.

  5. Affluenza

    A social condition arising from the desire to be more wealthy, successful or to "keep up with the Joneses." Affluenza is symptomatic of a culture that holds up financial success as one of the highest achievements.

  6. Icarus Factor

    The term Icarus factor describes a situation where managers or executives initiate an overly ambitious project which then fails. Fueled by excitement for the project, the executives are unable to reign in their misguided enthusiasm before it is too late to avoid the failure.
Trading Center