Type I Error

AAA

DEFINITION of 'Type I Error'

A type of error that occurs when a null hypothesis is rejected although it is true. The error accepts the alternative hypothesis, despite it being attributed to chance.

Also referred to as a "false positive".

INVESTOPEDIA EXPLAINS 'Type I Error'

Type I error rejects an idea that should have been accepted. It also claims that two observances are different, when they are actually the same.

For example, let's look at the trail of an accused criminal. The null hypothesis is that the person is innocent, while the alternative is guilty. A Type I error in this case would mean that the person is found guilty and is sent to jail, despite actually being innocent.

RELATED TERMS
  1. Alpha Risk

    The risk in a statistical test that a null hypothesis will be ...
  2. Beta Risk

    The probability that a false null hypothesis will be accepted ...
  3. Mean

    The simple mathematical average of a set of two or more numbers. ...
  4. Monte Carlo Simulation

    A problem solving technique used to approximate the probability ...
  5. Quantitative Analysis

    A business or financial analysis technique that seeks to understand ...
  6. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
Related Articles
  1. 5 Ways To Measure Mutual Fund Risk
    Mutual Funds & ETFs

    5 Ways To Measure Mutual Fund Risk

  2. Efficient Market Hypothesis: Is The ...
    Active Trading Fundamentals

    Efficient Market Hypothesis: Is The ...

  3. Is finance an art or a science?
    Active Trading Fundamentals

    Is finance an art or a science?

  4. Financial Concepts
    Options & Futures

    Financial Concepts

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center