Z-Test

AAA

DEFINITION of 'Z-Test'

A statistical test used to determine whether two population means are different when the variances are known and the sample size is large. The test statistic is assumed to have a normal distribution and nuisance parameters such as standard deviation should be known in order for an accurate z-test to be performed.

INVESTOPEDIA EXPLAINS 'Z-Test'

A one-sample location test, two-sample location test, paired difference test and maximum likelihood estimate are examples of tests that can be conducted as z-tests. Z-tests are closely related to t-tests, but t-tests are best performed when an experiment has a small sample size. Also, t-tests assume that the standard deviation is unknown, while z-tests assume that it is known. If the standard deviation of the population is unknown, the assumption that the sample variance equals the population variance is made.

RELATED TERMS
  1. P-Test

    A statistical method used to test one or more hypotheses within ...
  2. T-Test

    A statistical examination of two population means. A two-sample ...
  3. Adjusted Mean

    Statistical averages that have been corrected to compensate for ...
  4. Simple Random Sample

    A subset of a statistical population in which each member of ...
  5. Distribution

    1. When trading volume is higher than that of the previous day ...
  6. Statistically Significant

    The likelihood that a result or relationship is caused by something ...
Related Articles
  1. Find The Right Fit With Probability ...
    Fundamental Analysis

    Find The Right Fit With Probability ...

  2. Can Investors Trust Official Statistics?
    Economics

    Can Investors Trust Official Statistics?

  3. Hypothesis Testing in Finance: Concept ...
    Active Trading Fundamentals

    Hypothesis Testing in Finance: Concept ...

  4. Using Historical Volatility To Gauge ...
    Markets

    Using Historical Volatility To Gauge ...

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center