CFA® Level 1: CFA® Level 1

If the underlying theory suggests that the value of an estimated variable is greater than a particular number, it is appropriate to use:

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If the underlying theory suggests that the value of an estimated variable is greater than a particular number, it is appropriate to use:

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Explanation

When an observation is made and we see a value greater than the threshold suggested by the theory, we would like to known the probability of getting the larger value due simply to chance rather than to the event being driven by the theory. For this, we need to known the right-tail probabilities under the null hypothesis.