CFA® Level 1: CFA® Level 1 Exam - Rejection of Null Hypothesis

Rejection of Null Hypothesis

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A researcher has rejected the null hypothesis. The p-value in the test must be:

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The lowest significance level at which the null hypothesis can be rejected is called the p-value of the test. Thus, if the p-value is less than the significance level, the null hypothesis can be rejected at that significance level. To fix this in your mind, think about the p-value as the maximum probability that the null hypothesis is true despite observing the value of the test statistic that you have in the sample at hand. For e.g., suppose the p-value for a given sample turns out to be 3%. Then, if you reject the null, the probability that you have made an error in rejecting it is at most 3%. Clearly, if a critic asked you, "Is the probability that you have made an error less than 5%?" your answer would be, "yes." The critic will then conclude that your test is significant at the 5% level and perhaps even at a lower level.