Statistically Significant

What does 'Statistically Significant' mean

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.

Next Up

BREAKING DOWN '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. P-Value

The level of marginal significance within a statistical hypothesis ...
2. Statistical Significance

A result that is not likely to occur randomly, but rather is ...
3. Random Factor Analysis

A statistical analysis performed to determine the origin of random ...
4. Runs Test

A statistical procedure that examines whether a string of data ...
5. Simple Random Sample

A subset of a statistical population in which each member of ...
6. Null Hypothesis

A type of hypothesis used in statistics that proposes that no ...
Related Articles
1. Investing

How Statistical Significance is Determined

If something is statistically significant, itâ€™s unlikely that it happened by chance.

Hypothesis Testing in Finance: Concept & Examples

When you're indecisive about an investment, the best way to keep a cool head might be test various hypotheses using the most relevant statistics.

Understanding Statistics

Statistics provide the means to analyze data and then summarize it into a numerical form.
4. Investing

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.
5. Markets

Understanding the Simple Random Sample

A simple random sample is a subset of a statistical population in which each member of the subset has an equal probability of being chosen.
6. Markets

Financial Markets: Random, Cyclical Or Both?

Are the markets random or cyclical? It depends on who you ask. Here, we go over both sides of the argument.

Random Reinforcement: Why Most Traders Fail

This phenomenon can cause a trader to abandon a proven strategy or risk everything on chance. Find out how to avoid it.

Viewing The Market As Organized Chaos

Find out how a cat and a ladybug prove markets are both random and efficient.
9. Retirement

5 Reasons to Leave Retirement Planning to Your Wife

Wives live longer than their husbands, so their retirement stakes are higher. Luckily, certain qualities make women especially good at long-term planning

Women And Investing: It's A Style Thing

You don't have to be a boy or act like a boy to win. In fact, doing the opposite could be better for your financial health.
RELATED FAQS
1. What is the "random walk theory" and what does it mean for investors?

The random walk theory is the occurrence of an event determined by a series of random movements - in other words, events ... Read Answer >>
2. What are the best selection methods for creating a simple random sample?

Discover some of the methods that researchers and pollsters utilize to select a simple random sample from a population group ... Read Answer >>
3. How do researchers ensure that a simple random sample is an accurate representation ...

Learn which methods researchers employ to ensure that a simple random sample best approximates the larger population being ... Read Answer >>
4. What are the advantages of using a simple random sample to study a larger population?

Learn how simple random sampling works and what advantages it offers over other sampling methods when selecting a research ... Read Answer >>
5. What is the criteria for a simple random sample?

Discover the criterion for taking a simple random sample, in contrast to a systematic random sample, each person selected ... Read Answer >>
6. What are the disadvantages of using a simple random sample to approximate a larger ...

Learn what a simple random sample is, how researchers use it as a statistical tool and the disadvantages it carries when ... Read Answer >>
Hot Definitions
1. Diversification

A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
2. European Union - EU

A group of European countries that participates in the world economy as one economic unit and operates under one official ...
3. Sell-Off

The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
4. Brazil, Russia, India And China - BRIC

An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
5. Brexit

The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
6. Underweight

1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...