Hypothesis Testing Significance Level | CFA® Level 1 Exam Preparation

The Significance Level in Hypothesis Testing

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Question

The significance level in hypothesis testing refers to the probability that we will:

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A. B. C. D.

Explanation

Note that the significance level is the same as the probability of making a Type I error. A Type I error refers to the event that we will reject the null when, in fact, it is true. Clearly, lower significance levels are better, all else equal.