"use strict"; const {Fragment: _Fragment, jsx: _jsx, jsxs: _jsxs} = arguments[0]; const {useMDXComponents: _provideComponents} = arguments[0]; function _createMdxContent(props) { const _components = { annotation: "annotation", blockquote: "blockquote", br: "br", em: "em", h2: "h2", h3: "h3", li: "li", math: "math", mfrac: "mfrac", mi: "mi", mn: "mn", mo: "mo", mover: "mover", mrow: "mrow", mspace: "mspace", msqrt: "msqrt", mstyle: "mstyle", msub: "msub", msubsup: "msubsup", msup: "msup", mtext: "mtext", ol: "ol", p: "p", path: "path", semantics: "semantics", span: "span", strong: "strong", svg: "svg", ul: "ul", ..._provideComponents(), ...props.components }; return _jsxs(_Fragment, { children: [_jsx(_components.h2, { children: _jsx(_components.strong, { children: "Learning Outcomes" }) }), "\n", _jsx(_components.p, { children: "This article explains how FRM candidates should set up and interpret hypothesis tests used in finance and risk management, and how to choose among z, t, chi-square, and F test statistics. After reading, you will be able to:" }), "\n", _jsxs(_components.ul, { children: ["\n", _jsx(_components.li, { children: "Construct null and alternative hypotheses and choose one- vs two-tailed tests" }), "\n", _jsx(_components.li, { children: "Relate Type I/II errors to significance level, p-values, confidence intervals, and test power" }), "\n", _jsx(_components.li, { children: "Select and apply z, t, chi-square, and F tests in common FRM settings (means, variances, and regression)" }), "\n"] }), "\n", _jsx(_components.h2, { children: _jsx(_components.strong, { children: "GARP FRM Part 1 Syllabus" }) }), "\n", _jsx(_components.p, { children: "For the GARP FRM Part 1 exam, you are expected to understand hypothesis testing with a focus on the following syllabus points:" }), "\n", _jsxs(_components.ul, { children: ["\n", _jsx(_components.li, { children: "Construct null and alternative hypotheses; distinguish one-tailed vs two-tailed tests" }), "\n", _jsx(_components.li, { children: "Explain Type I and Type II errors; relate them to test size (significance) and power" }), "\n", _jsx(_components.li, { children: "Use p-values and confidence intervals; test differences in means; explain multiple testing bias" }), "\n"] }), "\n", _jsx(_components.h2, { children: _jsx(_components.strong, { children: "Test Your Knowledge" }) }), "\n", _jsx(_components.p, { children: _jsx(_components.em, { children: "Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision." }) }), "\n", _jsxs(_components.ol, { children: ["\n", _jsxs(_components.li, { children: ["\n", _jsx(_components.p, { children: "A risk analyst wants to show a strategy has a positive mean excess return. 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children: "0" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_A: \\mu \\leq 0" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3283em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mathnormal mtight", children: "A" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: ":" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8304em", verticalAlign: "-0.1944em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "≤" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "0" })] })] })] })] }), "\n"] }), "\n"] }), "\n", _jsxs(_components.li, { children: ["\n", _jsxs(_components.p, { children: ["A sample of ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "n" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "49" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "n=49" })] }) }) }), 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_jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "μ" }), _jsx(_components.mn, { children: "0" })] }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "2.50" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\mu_0=2.50" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.625em", verticalAlign: "-0.1944em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "0em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "2.50" })] })] })] }), ", and known population standard deviation ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "σ" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "0.021" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\sigma=0.021" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.03588em" }, children: "σ" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "0.021" })] })] })] }), ". Compute the z-statistic."] }), "\n"] }), "\n", _jsxs(_components.li, { children: ["\n", _jsxs(_components.p, { children: ["In a two-tailed test at ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "α" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "5" }), _jsx(_components.mi, { mathvariant: "normal", children: "%" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\alpha=5\\%" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8056em", verticalAlign: "-0.0556em" } }), _jsx(_components.span, { className: "mord", children: "5%" })] })] })] }), ", the test statistic is 2.30 (using a z or large-sample t reference). Approximate the p-value and state the decision at 5%."] }), "\n"] }), "\n", _jsxs(_components.li, { children: ["\n", _jsxs(_components.p, { children: ["True/False (brief explanation required): “If a researcher fails to reject ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), ", that proves ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), " is true.”"] }), "\n"] }), "\n"] }), "\n", _jsx(_components.h2, { children: _jsx(_components.strong, { children: "What Do You Know Already?" }) }), "\n", _jsxs(_components.ul, { children: ["\n", _jsxs(_components.li, { children: ["Can you explain why the null hypothesis typically includes an equality (e.g., ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mo, { children: "=" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "=" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.3669em" } }), _jsx(_components.span, { className: "mrel", children: "=" })] }) })] }), ", ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mo, { children: "≤" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\leq" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.7719em", verticalAlign: "-0.136em" } }), _jsx(_components.span, { className: "mrel", children: "≤" })] }) })] }), ", or ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mo, { children: "≥" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\geq" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.7719em", verticalAlign: "-0.136em" } }), _jsx(_components.span, { className: "mrel", children: "≥" })] }) })] }), ")?"] }), "\n", _jsx(_components.li, { children: "Can you state, in words, what a p-value measures?" }), "\n", _jsxs(_components.li, { children: ["Can you choose between a z-test and a t-test for a population mean when ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mi, { children: "σ" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\sigma" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.03588em" }, children: "σ" })] }) })] }), " is unknown?"] }), "\n"] }), "\n", _jsx(_components.p, { children: "Use these prompts to gauge your starting point; then focus your revision where your answers were least confident." }), "\n", _jsx(_components.h2, { children: _jsx(_components.strong, { children: "Introduction" }) }), "\n", _jsx(_components.p, { children: "Hypothesis testing is the standard statistical tool for turning sample evidence into decisions about population quantities that matter in risk management: expected returns, volatilities, correlations, model coefficients, and the adequacy of risk models. In an FRM context, these decisions often sit inside governance: model validation, backtesting, and risk committee approvals should be supported by clear statistical statements and controlled error rates." }), "\n", _jsx(_components.p, { children: "A key FRM skill is not only computing a test statistic, but also selecting the right reference distribution (z, t, chi-square, or F), setting the correct tails, and interpreting results using critical values, p-values, and confidence intervals. Many exam mistakes come from mixing these building blocks (for example, using a two-tailed critical value for a one-tailed alternative, or “accepting” the null)." }), "\n", _jsxs(_components.blockquote, { children: ["\n", _jsxs(_components.p, { children: [_jsx(_components.strong, { children: "Key Term: Hypothesis test" }), _jsx(_components.br, {}), "\n", "A procedure that uses sample data to decide whether to reject a maintained statement about a population parameter (the null hypothesis), controlling the probability of a false rejection at a chosen significance level."] }), "\n"] }), "\n", _jsx(_components.h2, { children: _jsx(_components.strong, { children: "Building blocks of a hypothesis test" }) }), "\n", _jsxs(_components.p, { children: ["A hypothesis is a precise statement about a population parameter (such as a mean ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mi, { children: "μ" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\mu" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.625em", verticalAlign: "-0.1944em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "μ" })] }) })] }), ", variance ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msup, { children: [_jsx(_components.mi, { children: "σ" }), _jsx(_components.mn, { children: "2" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\sigma^2" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8141em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.03588em" }, children: "σ" }), _jsx(_components.span, { className: "msupsub", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.8141em" }, children: _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) })] }) }) }) }) })] })] }) })] }), ", or a regression coefficient ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mi, { children: "β" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\beta" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8889em", verticalAlign: "-0.1944em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.05278em" }, children: "β" })] }) })] }), "). Hypothesis testing asks a single operational question:"] }), "\n", _jsx(_components.p, { children: "How likely is the observed sample evidence if the null hypothesis is true?" }), "\n", _jsx(_components.p, { children: "A complete hypothesis test has six components:" }), "\n", _jsxs(_components.ol, { children: ["\n", _jsxs(_components.li, { children: ["Null hypothesis ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), " (assumed true for the procedure)"] }), "\n", _jsxs(_components.li, { children: ["Alternative hypothesis ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mi, { children: "A" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_A" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3283em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mathnormal mtight", children: "A" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), " (values where ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), " should be rejected)"] }), "\n", _jsx(_components.li, { children: "Test statistic (computed from sample data)" }), "\n", _jsxs(_components.li, { children: ["Significance level ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mi, { children: "α" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\alpha" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" })] }) })] }), " (also called test size)"] }), "\n", _jsxs(_components.li, { children: ["Critical value(s) (from the reference distribution under ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), ")"] }), "\n", _jsxs(_components.li, { children: ["Decision rule (reject or fail to reject based on statistic vs critical value, or p-value vs ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mi, { children: "α" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\alpha" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" })] }) })] }), ")"] }), "\n"] }), "\n", _jsx(_components.p, { children: "Most test statistics follow a common structure:" }), "\n", _jsx(_components.p, { children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mtext, { children: "test statistic" }), _jsx(_components.mo, { children: "=" }), _jsxs(_components.mfrac, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mtext, { children: "sample estimate" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mtext, { children: "hypothesized value" })] }), _jsx(_components.mtext, { children: "standard error of the estimate" })] })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\text{test statistic}=\\frac{\\text{sample estimate} - \\text{hypothesized value}}{\\text{standard error of the estimate}}" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6679em" } }), _jsx(_components.span, { className: "mord text", children: _jsx(_components.span, { className: "mord", children: "test statistic" }) }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1.2772em", verticalAlign: "-0.345em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mopen nulldelimiter" }), _jsx(_components.span, { className: "mfrac", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsxs(_components.span, { className: "vlist", style: { height: "0.9322em" }, children: [_jsxs(_components.span, { style: { top: "-2.655em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: _jsx(_components.span, { className: "mord text mtight", children: _jsx(_components.span, { className: "mord mtight", children: "standard error of the estimate" }) }) }) })] }), _jsxs(_components.span, { style: { top: "-3.23em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "frac-line", style: { borderBottomWidth: "0.04em" } })] }), _jsxs(_components.span, { style: { top: "-3.4461em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsxs(_components.span, { className: "mord mtight", children: [_jsx(_components.span, { className: "mord text mtight", children: _jsx(_components.span, { className: "mord mtight", children: "sample estimate" }) }), _jsx(_components.span, { className: "mbin mtight", children: "−" }), _jsx(_components.span, { className: "mord text mtight", children: _jsx(_components.span, { className: "mord mtight", children: "hypothesized value" }) })] }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.345em" }, children: _jsx(_components.span, {}) }) })] }) }), _jsx(_components.span, { className: "mclose nulldelimiter" })] })] })] })] }) }), "\n", _jsxs(_components.p, { children: ["For a sample mean ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.mover, { accent: "true", children: [_jsx(_components.mi, { children: "x" }), _jsx(_components.mo, { children: "ˉ" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\bar{x}" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.5678em" } }), _jsx(_components.span, { className: "mord accent", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsxs(_components.span, { className: "vlist", style: { height: "0.5678em" }, children: [_jsxs(_components.span, { style: { top: "-3em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "x" })] }), _jsxs(_components.span, { style: { top: "-3em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "accent-body", style: { left: "-0.2222em" }, children: _jsx(_components.span, { className: "mord", children: "ˉ" }) })] })] }) }) }) })] }) })] }), ", the standard error is the standard deviation of the sampling distribution of the mean:"] }), "\n", _jsxs(_components.ul, { children: ["\n", _jsxs(_components.li, { children: ["If population standard deviation is known: ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "σ" }), _jsxs(_components.mover, { accent: "true", children: [_jsx(_components.mi, { children: "x" }), _jsx(_components.mo, { children: "ˉ" })] })] }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mstyle, { displaystyle: "true", scriptlevel: "0", children: _jsxs(_components.mfrac, { children: [_jsx(_components.mi, { children: "σ" }), _jsx(_components.msqrt, { children: _jsx(_components.mi, { children: "n" }) })] }) })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\sigma_{\\bar{x}}=\\dfrac{\\sigma}{\\sqrt{n}}" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.5806em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.03588em" }, children: "σ" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", 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} }), _jsx(_components.span, { className: "accent-body", style: { left: "-0.2222em" }, children: _jsx(_components.span, { className: "mord mtight", children: "ˉ" }) })] })] }) }) }) }) }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "2.0376em", verticalAlign: "-0.93em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mopen nulldelimiter" }), _jsx(_components.span, { 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})] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.2397em" }, children: _jsx(_components.span, {}) }) })] }) }) })] }), _jsxs(_components.span, { style: { top: "-3.23em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "frac-line", style: { borderBottomWidth: "0.04em" } })] }), _jsxs(_components.span, { style: { top: "-3.677em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "mord", children: _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.03588em" }, children: "σ" }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.93em" }, children: _jsx(_components.span, {}) }) })] }) }), _jsx(_components.span, { className: "mclose nulldelimiter" })] })] })] })] })] }), "\n", _jsxs(_components.li, { children: ["If population standard deviation is unknown: ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "s" }), _jsxs(_components.mover, { accent: "true", children: [_jsx(_components.mi, { children: "x" }), _jsx(_components.mo, { children: "ˉ" })] })] }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mstyle, { displaystyle: "true", scriptlevel: "0", children: _jsxs(_components.mfrac, { children: [_jsx(_components.mi, { children: "s" }), _jsx(_components.msqrt, { children: _jsx(_components.mi, { children: "n" }) })] }) })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "s_{\\bar{x}}=\\dfrac{s}{\\sqrt{n}}" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.5806em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", children: "s" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.2474em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "0em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), 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children: [_jsx(_components.strong, { children: "Key Term: Null hypothesis" }), _jsx(_components.br, {}), "\n", "The maintained statement about a population parameter that is assumed true during the test. For example:"] }), "\n", _jsx(_components.span, { className: "katex-display", children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", display: "block", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }), _jsx(_components.mo, { children: ":" }), _jsx(_components.mi, { children: "μ" }), _jsx(_components.mo, { children: "=" }), _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "μ" }), _jsx(_components.mn, { children: "0" })] })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0:\\mu=\\mu_0" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: ":" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.625em", verticalAlign: "-0.1944em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.625em", verticalAlign: "-0.1944em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "0em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] })] })] }) }), "\n", _jsx(_components.p, { children: "The null includes an equality condition." }), "\n", _jsxs(_components.p, { children: [_jsx(_components.strong, { children: "Key Term: Standard error" }), _jsx(_components.br, {}), "\n", "The estimated standard deviation of a sample estimator’s sampling distribution. 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-0\nc5.3,-9.3,12,-14,20,-14\nH400000v40H845.2724\ns-225.272,467,-225.272,467s-235,486,-235,486c-2.7,4.7,-9,7,-19,7\nc-6,0,-10,-1,-12,-3s-194,-422,-194,-422s-65,47,-65,47z\nM834 80h400000v40h-400000z" }) }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.1908em" }, children: _jsx(_components.span, {}) }) })] }) })] })] })] }) }), "\n"] }), "\n", _jsx(_components.h3, { children: "Decision language" }), "\n", _jsx(_components.p, { children: "A hypothesis test has only two statistically correct outcomes:" }), "\n", _jsxs(_components.ul, { children: ["\n", _jsxs(_components.li, { children: ["Reject ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] })] }), "\n", _jsxs(_components.li, { children: ["Fail to reject ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] })] }), "\n"] }), "\n", _jsxs(_components.p, { children: ["“Accept ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), "” is incorrect because failing to reject can occur either because ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), " is true or because the test has low power (for example, too little data)."] }), "\n", _jsx(_components.h2, { children: _jsx(_components.strong, { children: "Tail choice and critical regions" }) }), "\n", _jsx(_components.p, { children: "The tail structure is determined by the alternative hypothesis:" }), "\n", _jsxs(_components.ul, { children: ["\n", _jsxs(_components.li, { children: ["Two-tailed: ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mi, { children: "A" })] }), _jsx(_components.mo, { children: ":" }), _jsx(_components.mi, { children: "μ" }), _jsx(_components.mo, { mathvariant: "normal", children: "≠" }), _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "μ" }), _jsx(_components.mn, { children: "0" })] })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_A:\\mu\\neq\\mu_0" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3283em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mathnormal mtight", children: "A" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: ":" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: 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_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.625em", verticalAlign: "-0.1944em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "0em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] })] })] }), " (rejection regions in both tails)"] }), "\n", _jsxs(_components.li, { children: ["Upper-tailed: ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mi, { children: "A" })] }), _jsx(_components.mo, { children: ":" }), _jsx(_components.mi, { children: "μ" }), _jsx(_components.mo, { children: ">" }), _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "μ" }), _jsx(_components.mn, { children: "0" })] })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_A:\\mu>\\mu_0" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3283em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: 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"mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.625em", verticalAlign: "-0.1944em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "0em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: 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_jsx(_components.annotation, { encoding: "application/x-tex", children: "H_A:\\mu<\\mu_0" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3283em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mathnormal mtight", children: "A" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: ":" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.7335em", verticalAlign: "-0.1944em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "<" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.625em", verticalAlign: "-0.1944em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "0em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] })] })] }), " (rejection region only in the left tail)"] }), "\n"] }), "\n", _jsx(_components.p, { children: "Examples for a population mean:" }), "\n", _jsxs(_components.ul, { children: ["\n", _jsxs(_components.li, { children: ["Two-tailed: ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }), _jsx(_components.mo, { children: ":" }), _jsx(_components.mi, { children: "μ" }), _jsx(_components.mo, { children: "=" }), _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "μ" }), _jsx(_components.mn, { children: "0" })] })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0:\\mu=\\mu_0" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: ":" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.625em", verticalAlign: "-0.1944em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.625em", verticalAlign: "-0.1944em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "0em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] })] })] }), " vs ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mi, { children: "A" })] }), _jsx(_components.mo, { children: ":" }), _jsx(_components.mi, { children: "μ" }), _jsx(_components.mo, { mathvariant: "normal", children: "≠" }), _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "μ" }), _jsx(_components.mn, { children: "0" })] })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_A:\\mu\\neq\\mu_0" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3283em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mathnormal mtight", children: "A" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: ":" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8889em", verticalAlign: "-0.1944em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsxs(_components.span, { className: "mrel", children: [_jsx(_components.span, { className: "mrel", children: _jsx(_components.span, { className: "mord vbox", children: _jsx(_components.span, { className: "thinbox", children: _jsxs(_components.span, { className: "rlap", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8889em", verticalAlign: "-0.1944em" } }), _jsx(_components.span, { className: "inner", children: _jsx(_components.span, { className: "mord", children: _jsx(_components.span, { className: "mrel", children: "" }) }) }), _jsx(_components.span, { className: "fix" })] }) }) }) }), _jsx(_components.span, { className: "mrel", children: "=" })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.625em", verticalAlign: "-0.1944em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "0em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] })] })] })] }), "\n", _jsxs(_components.li, { children: ["Upper-tailed: ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }), _jsx(_components.mo, { children: ":" }), _jsx(_components.mi, { children: "μ" }), _jsx(_components.mo, { children: "≤" }), _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "μ" }), _jsx(_components.mn, { children: "0" })] })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0:\\mu\\leq\\mu_0" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: ":" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8304em", verticalAlign: "-0.1944em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "≤" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.625em", verticalAlign: "-0.1944em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "0em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] })] })] }), " vs ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mi, { children: "A" })] }), _jsx(_components.mo, { children: ":" }), _jsx(_components.mi, { children: "μ" }), _jsx(_components.mo, { children: ">" }), _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "μ" }), _jsx(_components.mn, { children: "0" })] })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_A:\\mu>\\mu_0" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3283em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mathnormal mtight", children: "A" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: ":" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.7335em", verticalAlign: "-0.1944em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: ">" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.625em", verticalAlign: "-0.1944em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "0em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] })] })] })] }), "\n", _jsxs(_components.li, { children: ["Lower-tailed: ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }), _jsx(_components.mo, { children: ":" }), _jsx(_components.mi, { children: "μ" }), _jsx(_components.mo, { children: "≥" }), _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "μ" }), _jsx(_components.mn, { children: "0" })] })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0:\\mu\\geq\\mu_0" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: ":" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8304em", verticalAlign: "-0.1944em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "≥" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.625em", verticalAlign: "-0.1944em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "0em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] })] })] }), " vs ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mi, { children: "A" })] }), _jsx(_components.mo, { children: ":" }), _jsx(_components.mi, { children: "μ" }), _jsx(_components.mo, { children: "<" }), _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "μ" }), _jsx(_components.mn, { children: "0" })] })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_A:\\mu<\\mu_0" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: 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[_jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "0em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] })] })] })] }), "\n"] }), "\n", _jsx(_components.p, { children: "In many finance applications, two-tailed tests are standard unless there is a clear reason to rule out one direction (for example, regulatory backtesting rules that care only about losses are naturally one-sided)." }), "\n", _jsx(_components.h2, { children: _jsx(_components.strong, { children: "Errors, significance level, and power" }) }), "\n", _jsx(_components.p, { children: "Any inference from a sample can be wrong. Hypothesis testing formalizes two error types:" }), "\n", _jsxs(_components.ul, { children: ["\n", _jsxs(_components.li, { children: ["Type I error: reject ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord 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"katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), " is true"] }), "\n", _jsxs(_components.li, { children: ["Type II error: fail to reject ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), " when ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", 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className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" })] }) })] }), " is the probability of a Type I error:"] }), "\n", _jsx(_components.p, { children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "α" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mi, { children: "P" }), _jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mtext, { children: "Type I error" }), _jsx(_components.mo, { stretchy: "false", children: ")" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\alpha=P(\\text{Type I error})" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1em", verticalAlign: "-0.25em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.13889em" }, children: "P" }), _jsx(_components.span, { className: "mopen", children: "(" }), _jsx(_components.span, { className: "mord text", children: _jsx(_components.span, { className: "mord", children: "Type I error" }) }), _jsx(_components.span, { className: "mclose", children: ")" })] })] })] }) }), "\n", _jsx(_components.p, { children: "Power is the probability of correctly rejecting a false null:" }), "\n", _jsx(_components.p, { children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mtext, { children: "Power" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "1" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mi, { children: "P" }), _jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mtext, { children: "Type II error" }), _jsx(_components.mo, { stretchy: "false", children: ")" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\text{Power}=1-P(\\text{Type II error})" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6833em" } }), _jsx(_components.span, { className: "mord text", children: _jsx(_components.span, { className: "mord", children: "Power" }) }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.7278em", verticalAlign: "-0.0833em" } }), _jsx(_components.span, { className: "mord", children: "1" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } }), _jsx(_components.span, { className: "mbin", children: "−" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1em", verticalAlign: "-0.25em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.13889em" }, children: "P" }), _jsx(_components.span, { className: "mopen", children: "(" }), _jsx(_components.span, { className: "mord text", children: _jsx(_components.span, { className: "mord", children: "Type II error" }) }), _jsx(_components.span, { className: "mclose", children: ")" })] })] })] }) }), "\n", _jsx(_components.p, { children: "Trade-offs that matter for FRM decisions:" }), "\n", _jsxs(_components.ul, { children: ["\n", _jsxs(_components.li, { children: ["Lowering ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mi, { children: "α" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\alpha" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" })] }) })] }), " (for example, from 5% to 1%) reduces false positives but usually increases false negatives (lower power), unless sample size rises."] }), "\n", _jsxs(_components.li, { children: ["For a fixed ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mi, { children: "α" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\alpha" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" })] }) })] }), ", larger samples increase power (they shrink standard errors, making true effects easier to detect)."] }), "\n"] }), "\n", _jsxs(_components.blockquote, { children: ["\n", _jsxs(_components.p, { children: [_jsx(_components.strong, { children: "Key Term: Significance level (α)" }), 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It also determines the size of the rejection region(s)."] }), "\n"] }), "\n", _jsx(_components.h2, { children: _jsx(_components.strong, { children: "p-values and confidence intervals" }) }), "\n", _jsx(_components.h3, { children: "p-values" }), "\n", _jsxs(_components.p, { children: ["The p-value is computed from the reference distribution of the test statistic under ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), "."] }), "\n", _jsx(_components.p, { children: "It measures:" }), "\n", _jsxs(_components.p, { children: ["The probability of obtaining a test statistic at least as extreme as the one observed, assuming ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), " is true."] }), "\n", _jsxs(_components.p, { children: ["Equivalently, it is the smallest significance level at which ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), " would be rejected."] }), "\n", _jsx(_components.p, { children: "Decision rule:" }), "\n", _jsxs(_components.ul, { children: ["\n", _jsxs(_components.li, { children: ["Reject ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), " if p-value ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mo, { children: "<" }), _jsx(_components.mi, { children: "α" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "<\\alpha" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.5782em", verticalAlign: "-0.0391em" } }), _jsx(_components.span, { className: "mrel", children: "<" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" })] })] })] })] }), "\n", _jsxs(_components.li, { children: ["Fail to reject ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), " if p-value ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mo, { children: "≥" }), _jsx(_components.mi, { children: "α" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\geq\\alpha" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.7719em", verticalAlign: "-0.136em" } }), _jsx(_components.span, { className: "mrel", children: "≥" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" })] })] })] })] }), "\n"] }), "\n", _jsxs(_components.p, { children: ["For a two-tailed z-test with observed statistic ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mi, { children: "z" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "z" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.04398em" }, children: "z" })] }) })] }), ":"] }), "\n", _jsx(_components.p, { children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "p" }), _jsx(_components.mtext, { children: "-value" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "2" }), _jsxs(_components.mrow, { children: [_jsx(_components.mo, { fence: "true", children: "(" }), _jsx(_components.mn, { children: "1" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mi, { mathvariant: "normal", children: "Φ" }), _jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mi, { mathvariant: "normal", children: "∣" }), _jsx(_components.mi, { children: "z" }), _jsx(_components.mi, { mathvariant: "normal", children: "∣" }), _jsx(_components.mo, { stretchy: "false", children: ")" }), _jsx(_components.mo, { fence: "true", children: ")" })] })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "p\\text{-value}=2\\left(1-\\Phi(|z|)\\right)" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8889em", verticalAlign: "-0.1944em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "p" }), _jsx(_components.span, { className: "mord text", children: _jsx(_components.span, { className: "mord", children: "-value" }) }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1em", verticalAlign: "-0.25em" } }), _jsx(_components.span, { className: "mord", children: "2" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.1667em" } }), _jsxs(_components.span, { className: "minner", children: [_jsx(_components.span, { className: "mopen delimcenter", style: { top: "0em" }, children: "(" }), _jsx(_components.span, { className: "mord", children: "1" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } }), _jsx(_components.span, { className: "mbin", children: "−" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } }), _jsx(_components.span, { className: "mord", children: "Φ" }), _jsx(_components.span, { className: "mopen", children: "(" }), _jsx(_components.span, { className: "mord", children: "∣" }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.04398em" }, children: "z" }), _jsx(_components.span, { className: "mord", children: "∣" }), _jsx(_components.span, { className: "mclose", children: ")" }), _jsx(_components.span, { className: "mclose delimcenter", style: { top: "0em" }, children: ")" })] })] })] })] }) }), "\n", _jsxs(_components.p, { children: ["where ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { mathvariant: "normal", children: "Φ" }), _jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mo, { children: "⋅" }), _jsx(_components.mo, { stretchy: "false", children: ")" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\Phi(\\cdot)" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1em", verticalAlign: "-0.25em" } }), _jsx(_components.span, { className: "mord", children: "Φ" }), _jsx(_components.span, { className: "mopen", children: "(" }), _jsx(_components.span, { className: "mord", children: "⋅" }), _jsx(_components.span, { className: "mclose", children: ")" })] }) })] }), " is the standard normal CDF."] }), "\n", _jsxs(_components.blockquote, { children: ["\n", _jsxs(_components.p, { children: [_jsx(_components.strong, { children: "Key Term: p-value" }), _jsx(_components.br, {}), "\n", "The probability, under the null hypothesis, of observing a test statistic that is as extreme as (or more extreme than) the one computed from the sample."] }), "\n"] }), "\n", _jsx(_components.h3, { children: "Confidence intervals and hypothesis tests" }), "\n", _jsxs(_components.p, { children: ["A confidence interval (CI) is a range of parameter values consistent with the sample evidence at a stated confidence level ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mn, { children: "1" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mi, { children: "α" }), _jsx(_components.mo, { stretchy: "false", children: ")" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "(1-\\alpha)" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1em", verticalAlign: "-0.25em" } }), _jsx(_components.span, { className: "mopen", children: "(" }), _jsx(_components.span, { className: "mord", children: "1" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } }), _jsx(_components.span, { className: "mbin", children: "−" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1em", verticalAlign: "-0.25em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" }), _jsx(_components.span, { className: "mclose", children: ")" })] })] })] }), "."] }), "\n", _jsx(_components.p, { children: "Generic two-sided CI form:" }), "\n", _jsx(_components.p, { children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mtext, { children: "estimate" }), _jsx(_components.mo, { children: "±" }), _jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mtext, { children: "critical value" }), _jsx(_components.mo, { stretchy: "false", children: ")" }), _jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mtext, { children: "standard error" }), _jsx(_components.mo, { stretchy: "false", children: ")" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\text{estimate} \\pm (\\text{critical value})(\\text{standard error})" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.7512em", verticalAlign: "-0.0833em" } }), _jsx(_components.span, { className: "mord text", children: _jsx(_components.span, { className: "mord", children: "estimate" }) }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } }), _jsx(_components.span, { className: "mbin", children: "±" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1em", verticalAlign: "-0.25em" } }), _jsx(_components.span, { className: "mopen", children: "(" }), _jsx(_components.span, { className: "mord text", children: _jsx(_components.span, { className: "mord", children: "critical value" }) }), _jsx(_components.span, { className: "mclose", children: ")" }), _jsx(_components.span, { className: "mopen", children: "(" }), _jsx(_components.span, { className: "mord text", children: _jsx(_components.span, { className: "mord", children: "standard error" }) }), _jsx(_components.span, { className: "mclose", children: ")" })] })] })] }) }), "\n", _jsxs(_components.p, { children: ["For a two-tailed hypothesis test at significance level ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mi, { children: "α" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\alpha" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" })] }) })] }), ", the matching CI has confidence level ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mn, { children: "1" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mi, { children: "α" }), _jsx(_components.mo, { stretchy: "false", children: ")" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "(1-\\alpha)" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1em", verticalAlign: "-0.25em" } }), _jsx(_components.span, { className: "mopen", children: "(" }), _jsx(_components.span, { className: "mord", children: "1" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } }), _jsx(_components.span, { className: "mbin", children: "−" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1em", verticalAlign: "-0.25em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" }), _jsx(_components.span, { className: "mclose", children: ")" })] })] })] }), ". The link is operational:"] }), "\n", _jsxs(_components.ul, { children: ["\n", _jsxs(_components.li, { children: ["If the hypothesized value lies outside the CI, reject ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] })] }), "\n", _jsxs(_components.li, { children: ["If the hypothesized value lies inside the CI, fail to reject ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), 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"\n", _jsxs(_components.ul, { children: ["\n", _jsxs(_components.li, { children: ["Upper tail test (lower bound only):", _jsx(_components.br, {}), "\n", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mo, { fence: "true", children: "[" }), _jsx(_components.mtext, { children: "estimate" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mtext, { children: "critical" }), _jsx(_components.mo, { stretchy: "false", children: ")" }), _jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mtext, { children: "SE" }), _jsx(_components.mo, { stretchy: "false", children: ")" }), _jsx(_components.mo, { separator: "true", children: "," }), _jsx(_components.mtext, { children: " " }), _jsx(_components.mi, { mathvariant: "normal", children: "∞" }), _jsx(_components.mo, { fence: "true", children: ")" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\left[\\text{estimate}-(\\text{critical})(\\text{SE}),\\ \\infty\\right)" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1em", verticalAlign: "-0.25em" } }), _jsxs(_components.span, { className: "minner", children: [_jsx(_components.span, { className: "mopen delimcenter", style: { top: "0em" }, children: "[" }), _jsx(_components.span, { className: "mord text", children: _jsx(_components.span, { className: "mord", children: "estimate" }) }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } }), _jsx(_components.span, { className: "mbin", children: "−" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } }), _jsx(_components.span, { className: "mopen", children: "(" }), _jsx(_components.span, { className: "mord text", children: _jsx(_components.span, { className: "mord", children: "critical" }) }), _jsx(_components.span, { className: "mclose", children: ")" }), _jsx(_components.span, { className: "mopen", children: "(" }), _jsx(_components.span, { className: "mord text", children: _jsx(_components.span, { className: "mord", children: "SE" }) }), _jsx(_components.span, { className: "mclose", children: ")" }), _jsx(_components.span, { className: "mpunct", children: "," }), _jsx(_components.span, { className: "mspace", children: " " }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.1667em" } }), _jsx(_components.span, { className: "mord", children: "∞" }), _jsx(_components.span, { className: "mclose delimcenter", style: { top: "0em" }, children: ")" })] })] }) })] })] }), "\n", _jsxs(_components.li, { children: ["Lower tail test (upper bound only):", _jsx(_components.br, {}), "\n", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mo, { fence: "true", children: "(" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mi, { mathvariant: "normal", children: "∞" }), _jsx(_components.mo, { separator: "true", children: "," }), _jsx(_components.mtext, { children: " estimate" }), _jsx(_components.mo, { children: "+" }), _jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mtext, { children: "critical" }), _jsx(_components.mo, { stretchy: "false", children: ")" }), _jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mtext, { children: "SE" }), _jsx(_components.mo, { stretchy: "false", children: ")" }), _jsx(_components.mo, { fence: "true", children: "]" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\left(-\\infty,\\ \\text{estimate}+(\\text{critical})(\\text{SE})\\right]" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1em", verticalAlign: "-0.25em" } }), _jsxs(_components.span, { className: "minner", children: [_jsx(_components.span, { className: "mopen delimcenter", style: { top: "0em" }, children: "(" }), _jsx(_components.span, { className: "mord", children: "−" }), _jsx(_components.span, { className: "mord", children: "∞" }), _jsx(_components.span, { className: "mpunct", children: "," }), _jsx(_components.span, { className: "mspace", children: " " }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.1667em" } }), _jsx(_components.span, { className: "mord text", children: _jsx(_components.span, { className: "mord", children: "estimate" }) }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } }), _jsx(_components.span, { className: "mbin", children: "+" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } }), _jsx(_components.span, { className: "mopen", children: "(" }), _jsx(_components.span, { className: "mord text", children: _jsx(_components.span, { className: "mord", children: "critical" }) }), _jsx(_components.span, { className: "mclose", children: ")" }), _jsx(_components.span, { className: "mopen", children: "(" }), _jsx(_components.span, { className: "mord text", children: _jsx(_components.span, { className: "mord", children: "SE" }) }), _jsx(_components.span, { className: "mclose", children: ")" }), _jsx(_components.span, { className: "mclose delimcenter", style: { top: "0em" }, children: "]" })] })] }) })] })] }), "\n"] }), "\n", _jsx(_components.h2, { children: _jsx(_components.strong, { children: "z-tests for population means" }) }), "\n", _jsx(_components.h3, { children: "When a z-test is appropriate" }), "\n", _jsx(_components.p, { children: "A z-test for a population mean is used when:" }), "\n", _jsxs(_components.ul, { children: ["\n", _jsx(_components.li, { children: "The population variance is known, and the population is normal, or" }), "\n", _jsx(_components.li, { children: "The population variance is known and the sample is large (so the CLT makes the sample mean approximately normal)" }), "\n"] }), "\n", _jsx(_components.p, { children: "Test statistic:" }), "\n", _jsx(_components.p, { children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: 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mtight", children: "n" }) })] }), _jsxs(_components.span, { style: { top: "-2.7659em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "hide-tail mtight", style: { minWidth: "0.853em", height: "1.08em" }, children: _jsx(_components.svg, { xmlns: "http://www.w3.org/2000/svg", width: "400em", height: "1.08em", viewBox: "0 0 400000 1080", preserveAspectRatio: "xMinYMin slice", children: _jsx(_components.path, { d: "M95,702\nc-2.7,0,-7.17,-2.7,-13.5,-8c-5.8,-5.3,-9.5,-10,-9.5,-14\nc0,-2,0.3,-3.3,1,-4c1.3,-2.7,23.83,-20.7,67.5,-54\nc44.2,-33.3,65.8,-50.3,66.5,-51c1.3,-1.3,3,-2,5,-2c4.7,0,8.7,3.3,12,10\ns173,378,173,378c0.7,0,35.3,-71,104,-213c68.7,-142,137.5,-285,206.5,-429\nc69,-144,104.5,-217.7,106.5,-221\nl0 -0\nc5.3,-9.3,12,-14,20,-14\nH400000v40H845.2724\ns-225.272,467,-225.272,467s-235,486,-235,486c-2.7,4.7,-9,7,-19,7\nc-6,0,-10,-1,-12,-3s-194,-422,-194,-422s-65,47,-65,47z\nM834 80h400000v40h-400000z" }) }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.2341em" }, children: _jsx(_components.span, {}) }) })] }) })] }) })] }), _jsxs(_components.span, { style: { top: "-3.23em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "frac-line", style: { borderBottomWidth: "0.04em" } })] }), _jsxs(_components.span, { style: { top: "-3.4461em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsxs(_components.span, { className: "mord mtight", children: [_jsx(_components.span, { className: "mord accent mtight", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsxs(_components.span, { className: "vlist", style: { height: "0.5678em" }, children: [_jsxs(_components.span, { style: { top: "-2.7em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "mord mathnormal mtight", children: "x" })] }), _jsxs(_components.span, { style: { top: "-2.7em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "accent-body", style: { left: "-0.2222em" }, children: _jsx(_components.span, { className: "mord mtight", children: "ˉ" }) })] })] }) }) }) }), _jsx(_components.span, { className: "mbin mtight", children: "−" }), _jsxs(_components.span, { className: "mord mtight", children: [_jsx(_components.span, { className: "mord mathnormal mtight", children: "μ" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3173em" }, children: _jsxs(_components.span, { style: { top: "-2.357em", marginLeft: "0em", marginRight: "0.0714em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.5em" } }), _jsx(_components.span, { className: "sizing reset-size3 size1 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.143em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.5491em" }, children: _jsx(_components.span, {}) }) })] }) }), _jsx(_components.span, { className: "mclose nulldelimiter" })] })] })] })] }) }), "\n", _jsx(_components.p, { children: "Common critical z-values used in FRM-style problems (memorize):" }), "\n", _jsxs(_components.ul, { children: ["\n", _jsxs(_components.li, { children: ["One-tailed at ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "α" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "5" }), _jsx(_components.mi, { mathvariant: "normal", children: "%" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\alpha=5\\%" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8056em", verticalAlign: "-0.0556em" } }), _jsx(_components.span, { className: "mord", children: "5%" })] })] })] }), ": ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "z" }), _jsx(_components.mn, { children: "0.05" })] }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "1.645" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "z_{0.05}=1.645" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.5806em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.04398em" }, children: "z" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.044em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0.05" }) }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "1.645" })] })] })] })] }), "\n", _jsxs(_components.li, { children: ["Two-tailed at ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "α" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "5" }), _jsx(_components.mi, { mathvariant: "normal", children: "%" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\alpha=5\\%" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8056em", verticalAlign: "-0.0556em" } }), _jsx(_components.span, { className: "mord", children: "5%" })] })] })] }), ": ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mo, { children: "±" }), _jsx(_components.mn, { children: "1.96" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\pm 1.96" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.7278em", verticalAlign: "-0.0833em" } }), _jsx(_components.span, { className: "mord", children: "±" }), _jsx(_components.span, { className: "mord", children: "1.96" })] }) })] })] }), "\n", _jsxs(_components.li, { children: ["Two-tailed at ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "α" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "1" }), _jsx(_components.mi, { mathvariant: "normal", children: "%" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\alpha=1\\%" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8056em", verticalAlign: "-0.0556em" } }), _jsx(_components.span, { className: "mord", children: "1%" })] })] })] }), ": ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mo, { children: "±" }), _jsx(_components.mn, { children: "2.58" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\pm 2.58" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.7278em", verticalAlign: "-0.0833em" } }), _jsx(_components.span, { className: "mord", children: "±" }), _jsx(_components.span, { className: "mord", children: "2.58" })] }) })] })] }), "\n"] }), "\n", _jsx(_components.h3, { children: "Worked Example 1.1" }), "\n", _jsxs(_components.p, { children: ["A manufacturer targets a mean length of 2.50 units. A sample of ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "n" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "49" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "n=49" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "n" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "49" })] })] })] }), " items has mean ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.mover, { accent: "true", children: [_jsx(_components.mi, { children: "x" }), _jsx(_components.mo, { children: "ˉ" })] }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "2.49" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\bar{x}=2.49" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.5678em" } }), _jsx(_components.span, { className: "mord accent", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsxs(_components.span, { className: "vlist", style: { height: "0.5678em" }, children: [_jsxs(_components.span, { style: { top: "-3em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "x" })] }), _jsxs(_components.span, { style: { top: "-3em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "accent-body", style: { left: "-0.2222em" }, children: _jsx(_components.span, { className: "mord", children: "ˉ" }) })] })] }) }) }) }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "2.49" })] })] })] }), ". The population standard deviation is known: ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "σ" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "0.021" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\sigma=0.021" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.03588em" }, children: "σ" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "0.021" })] })] })] }), ". Test at ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "α" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "5" }), _jsx(_components.mi, { mathvariant: "normal", children: "%" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\alpha=5\\%" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8056em", verticalAlign: "-0.0556em" } }), _jsx(_components.span, { className: "mord", children: "5%" })] })] })] }), " whether the machine is out of adjustment (two-tailed)."] }), "\n", _jsxs(_components.blockquote, { children: ["\n", _jsxs(_components.p, { children: [_jsx(_components.strong, { children: "Answer:" }), _jsx(_components.br, {}), "\n", "Step 1: State hypotheses."] }), "\n", _jsx(_components.span, { className: "katex-display", children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", display: "block", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }), _jsx(_components.mo, { children: ":" }), _jsx(_components.mi, { children: "μ" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "2.50" }), _jsx(_components.mspace, { width: "1em" }), _jsx(_components.mtext, { children: "vs" }), _jsx(_components.mspace, { width: "1em" }), _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mi, { children: "A" })] }), _jsx(_components.mo, { children: ":" }), _jsx(_components.mi, { children: "μ" }), _jsx(_components.mo, { mathvariant: "normal", children: "≠" }), _jsx(_components.mn, { children: "2.50" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0:\\mu=2.50 \\quad \\text{vs} \\quad H_A:\\mu\\neq 2.50" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: ":" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.625em", verticalAlign: "-0.1944em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsx(_components.span, { className: "mord", children: "2.50" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "1em" } }), _jsx(_components.span, { className: "mord text", children: _jsx(_components.span, { className: "mord", children: "vs" }) }), _jsx(_components.span, { className: "mspace", style: { marginRight: "1em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3283em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mathnormal mtight", children: "A" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: ":" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8889em", verticalAlign: "-0.1944em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsxs(_components.span, { className: "mrel", children: [_jsx(_components.span, { className: "mrel", children: _jsx(_components.span, { className: "mord vbox", children: _jsx(_components.span, { className: "thinbox", children: _jsxs(_components.span, { className: "rlap", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8889em", verticalAlign: "-0.1944em" } }), _jsx(_components.span, { className: "inner", children: _jsx(_components.span, { className: "mord", children: _jsx(_components.span, { className: "mrel", children: "" }) }) }), _jsx(_components.span, { className: "fix" })] }) }) }) }), _jsx(_components.span, { className: "mrel", children: "=" })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "2.50" })] })] })] }) }), "\n", _jsxs(_components.p, { children: ["Step 2: Select test statistic (z-test because σ is known and n is large).", _jsx(_components.br, {}), "\n", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "z" }), _jsx(_components.mo, { children: "=" }), _jsxs(_components.mfrac, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.mover, { accent: "true", children: [_jsx(_components.mi, { children: "x" }), _jsx(_components.mo, { children: "ˉ" })] }), _jsx(_components.mo, { children: "−" }), _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "μ" }), _jsx(_components.mn, { children: "0" })] })] }), _jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "σ" }), _jsx(_components.mi, { mathvariant: "normal", children: "/" }), _jsx(_components.msqrt, { children: _jsx(_components.mi, { children: "n" }) })] })] })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "z=\\frac{\\bar{x}-\\mu_0}{\\sigma/\\sqrt{n}}" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.04398em" }, children: "z" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1.4036em", verticalAlign: "-0.5491em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mopen nulldelimiter" }), _jsx(_components.span, { className: "mfrac", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsxs(_components.span, { className: "vlist", style: { height: "0.8544em" }, children: [_jsxs(_components.span, { style: { top: "-2.6259em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsxs(_components.span, { className: "mord mtight", children: [_jsx(_components.span, { className: "mord mathnormal mtight", style: { marginRight: "0.03588em" }, children: "σ" }), _jsx(_components.span, { className: "mord mtight", children: "/" }), _jsx(_components.span, { className: "mord sqrt mtight", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsxs(_components.span, { className: "vlist", style: { height: "0.8059em" }, children: [_jsxs(_components.span, { className: "svg-align", style: { top: "-3em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "mord mtight", style: { paddingLeft: "0.833em" }, children: _jsx(_components.span, { className: "mord mathnormal mtight", children: "n" }) })] }), _jsxs(_components.span, { style: { top: "-2.7659em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "hide-tail mtight", style: { minWidth: "0.853em", height: "1.08em" }, children: _jsx(_components.svg, { xmlns: "http://www.w3.org/2000/svg", width: "400em", height: "1.08em", viewBox: "0 0 400000 1080", preserveAspectRatio: "xMinYMin slice", children: _jsx(_components.path, { d: "M95,702\nc-2.7,0,-7.17,-2.7,-13.5,-8c-5.8,-5.3,-9.5,-10,-9.5,-14\nc0,-2,0.3,-3.3,1,-4c1.3,-2.7,23.83,-20.7,67.5,-54\nc44.2,-33.3,65.8,-50.3,66.5,-51c1.3,-1.3,3,-2,5,-2c4.7,0,8.7,3.3,12,10\ns173,378,173,378c0.7,0,35.3,-71,104,-213c68.7,-142,137.5,-285,206.5,-429\nc69,-144,104.5,-217.7,106.5,-221\nl0 -0\nc5.3,-9.3,12,-14,20,-14\nH400000v40H845.2724\ns-225.272,467,-225.272,467s-235,486,-235,486c-2.7,4.7,-9,7,-19,7\nc-6,0,-10,-1,-12,-3s-194,-422,-194,-422s-65,47,-65,47z\nM834 80h400000v40h-400000z" }) }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.2341em" }, children: _jsx(_components.span, {}) }) })] }) })] }) })] }), _jsxs(_components.span, { style: { top: "-3.23em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "frac-line", style: { borderBottomWidth: "0.04em" } })] }), _jsxs(_components.span, { style: { top: "-3.4461em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsxs(_components.span, { className: "mord mtight", children: [_jsx(_components.span, { className: "mord accent mtight", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsxs(_components.span, { className: "vlist", style: { height: "0.5678em" }, children: [_jsxs(_components.span, { style: { top: "-2.7em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "mord mathnormal mtight", children: "x" })] }), _jsxs(_components.span, { style: { top: "-2.7em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "accent-body", style: { left: "-0.2222em" }, children: _jsx(_components.span, { className: "mord mtight", children: "ˉ" }) })] })] }) }) }) }), _jsx(_components.span, { className: "mbin mtight", children: "−" }), _jsxs(_components.span, { className: "mord mtight", children: [_jsx(_components.span, { className: "mord mathnormal mtight", children: "μ" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3173em" }, children: _jsxs(_components.span, { style: { top: "-2.357em", marginLeft: "0em", marginRight: "0.0714em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.5em" } }), _jsx(_components.span, { className: "sizing reset-size3 size1 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.143em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.5491em" }, children: _jsx(_components.span, {}) }) })] }) }), _jsx(_components.span, { className: "mclose nulldelimiter" })] })] })] })] })] }), "\n", _jsxs(_components.p, { children: ["Step 3: Compute z.", _jsx(_components.br, {}), "\n", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "z" }), _jsx(_components.mo, { children: "=" }), _jsxs(_components.mfrac, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mn, { children: "2.49" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mn, { children: "2.50" })] }), _jsxs(_components.mrow, { children: [_jsx(_components.mn, { children: "0.021" }), _jsx(_components.mi, { mathvariant: "normal", children: "/" }), _jsx(_components.msqrt, { children: _jsx(_components.mn, { children: "49" }) })] })] }), _jsx(_components.mo, { children: "=" }), _jsxs(_components.mfrac, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mo, { children: "−" }), _jsx(_components.mn, { children: "0.01" })] }), _jsx(_components.mn, { children: "0.003" })] }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mn, { children: "3.33" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "z=\\frac{2.49-2.50}{0.021/\\sqrt{49}}=\\frac{-0.01}{0.003}= -3.33" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.04398em" }, children: "z" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1.4691em", verticalAlign: "-0.624em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mopen nulldelimiter" }), _jsx(_components.span, { className: "mfrac", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsxs(_components.span, { className: "vlist", style: { height: "0.8451em" }, children: [_jsxs(_components.span, { style: { top: "-2.551em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsxs(_components.span, { className: "mord mtight", children: [_jsx(_components.span, { className: "mord mtight", children: "0.021/" }), _jsx(_components.span, { className: "mord sqrt mtight", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsxs(_components.span, { className: "vlist", style: { height: "0.9128em" }, children: [_jsxs(_components.span, { className: "svg-align", style: { top: "-3em" }, children: [_jsx(_components.span, { className: "pstrut", style: { 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-0\nc5.3,-9.3,12,-14,20,-14\nH400000v40H845.2724\ns-225.272,467,-225.272,467s-235,486,-235,486c-2.7,4.7,-9,7,-19,7\nc-6,0,-10,-1,-12,-3s-194,-422,-194,-422s-65,47,-65,47z\nM834 80h400000v40h-400000z" }) }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.1272em" }, children: _jsx(_components.span, {}) }) })] }) })] }) })] }), _jsxs(_components.span, { style: { top: "-3.23em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "frac-line", style: { borderBottomWidth: "0.04em" } })] }), _jsxs(_components.span, { style: { top: "-3.394em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsxs(_components.span, { className: "mord mtight", children: [_jsx(_components.span, { className: "mord mtight", children: "2.49" }), _jsx(_components.span, { className: "mbin mtight", children: "−" }), _jsx(_components.span, { className: "mord mtight", children: "2.50" })] }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.624em" }, children: _jsx(_components.span, {}) }) })] }) }), _jsx(_components.span, { className: "mclose nulldelimiter" })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1.1901em", verticalAlign: "-0.345em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mopen nulldelimiter" }), _jsx(_components.span, { className: "mfrac", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsxs(_components.span, { className: "vlist", style: { height: "0.8451em" }, children: [_jsxs(_components.span, { style: { top: "-2.655em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0.003" }) }) })] }), _jsxs(_components.span, { style: { top: "-3.23em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "frac-line", style: { borderBottomWidth: "0.04em" } })] }), _jsxs(_components.span, { style: { top: "-3.394em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsxs(_components.span, { className: "mord mtight", children: [_jsx(_components.span, { className: "mord mtight", children: "−" }), _jsx(_components.span, { className: "mord mtight", children: "0.01" })] }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.345em" }, children: _jsx(_components.span, {}) }) })] }) }), _jsx(_components.span, { className: "mclose nulldelimiter" })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.7278em", verticalAlign: "-0.0833em" } }), _jsx(_components.span, { className: "mord", children: "−" }), _jsx(_components.span, { className: "mord", children: "3.33" })] })] })] })] }), "\n", _jsx(_components.p, { children: "Step 4: Critical values (two-tailed, 5%): ± 1.96." }), "\n", _jsxs(_components.p, { children: ["Step 5: Decision.", _jsx(_components.br, {}), "\n", "Since -3.33 < -1.96, reject H₀."] }), "\n", _jsxs(_components.p, { children: ["Step 6: Interpretation.", _jsx(_components.br, {}), "\n", "The mean length is statistically different from 2.50 at the 5% level; evidence supports that the process mean has shifted."] }), "\n"] }), "\n", _jsx(_components.h2, { children: _jsx(_components.strong, { children: "t-tests for means and regression coefficients" }) }), "\n", _jsx(_components.h3, { children: "Why the t-distribution appears" }), "\n", _jsxs(_components.p, { children: ["In finance, the population variance is rarely known. When ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mi, { children: "σ" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\sigma" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.03588em" }, children: "σ" })] }) })] }), " is unknown and replaced by the sample standard deviation ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mi, { children: "s" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "s" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "s" })] }) })] }), ", the standardized mean follows a t-distribution (under normality, exactly; under large samples, approximately)."] }), "\n", _jsx(_components.p, { children: "For a hypothesis about a population mean, the t-statistic is:" }), "\n", _jsx(_components.p, { children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: 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[_jsx(_components.span, { className: "mord accent mtight", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsxs(_components.span, { className: "vlist", style: { height: "0.5678em" }, children: [_jsxs(_components.span, { style: { top: "-2.7em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "mord mathnormal mtight", children: "x" })] }), _jsxs(_components.span, { style: { top: "-2.7em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "accent-body", style: { left: "-0.2222em" }, children: _jsx(_components.span, { className: "mord mtight", children: "ˉ" }) })] })] }) }) }) }), _jsx(_components.span, { className: "mbin mtight", children: "−" }), _jsxs(_components.span, { className: "mord mtight", children: [_jsx(_components.span, { className: "mord mathnormal mtight", children: "μ" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3173em" }, children: _jsxs(_components.span, { style: { top: "-2.357em", marginLeft: "0em", marginRight: "0.0714em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.5em" } }), _jsx(_components.span, { className: "sizing reset-size3 size1 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.143em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.5491em" }, children: _jsx(_components.span, {}) }) })] }) }), _jsx(_components.span, { className: "mclose nulldelimiter" })] })] })] })] }) }), "\n", _jsx(_components.p, { children: "Degrees of freedom:" }), "\n", _jsx(_components.p, { children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mtext, { children: "df" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mi, { children: "n" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mn, { children: "1" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\text{df}=n-1" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6944em" } }), _jsx(_components.span, { className: "mord text", children: _jsx(_components.span, { className: "mord", children: "df" }) }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6667em", verticalAlign: "-0.0833em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "n" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } }), _jsx(_components.span, { className: "mbin", children: "−" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "1" })] })] })] }) }), "\n", _jsx(_components.p, { children: "As df increases, the t-distribution becomes closer to the standard normal, but with heavier tails for small samples (so critical values are larger in absolute value)." }), "\n", _jsx(_components.p, { children: "Appropriate use (common FRM rule set):" }), "\n", _jsxs(_components.ul, { children: ["\n", _jsxs(_components.li, { children: ["Use a t-test if population variance is unknown and:", "\n", _jsxs(_components.ul, { children: ["\n", _jsxs(_components.li, { children: ["The sample is large (", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "n" }), _jsx(_components.mo, { children: "≥" }), _jsx(_components.mn, { children: "30" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "n\\geq 30" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.7719em", verticalAlign: "-0.136em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "n" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "≥" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "30" })] })] })] }), "), or"] }), "\n", _jsx(_components.li, { children: "The sample is small but the population is normal or approximately normal" }), "\n"] }), "\n"] }), "\n", _jsx(_components.li, { children: "If the sample is small and the population is clearly nonnormal, there is no reliable standard test in this framework" }), "\n"] }), "\n", _jsx(_components.h3, { children: "Worked Example 2.1" }), "\n", _jsxs(_components.p, { children: ["A risk manager has ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "n" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "16" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "n=16" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "n" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "16" })] })] })] }), " monthly excess returns for a strategy. The sample mean is ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.mover, { accent: "true", children: [_jsx(_components.mi, { children: "x" }), _jsx(_components.mo, { children: "ˉ" })] }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "0.12" }), _jsx(_components.mi, { mathvariant: "normal", children: "%" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\bar{x}=0.12\\%" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.5678em" } }), _jsx(_components.span, { className: "mord accent", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsxs(_components.span, { className: "vlist", style: { height: "0.5678em" }, children: [_jsxs(_components.span, { style: { top: "-3em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "x" })] }), _jsxs(_components.span, { style: { top: "-3em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "accent-body", style: { left: "-0.2222em" }, children: _jsx(_components.span, { className: "mord", children: "ˉ" }) })] })] }) }) }) }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8056em", verticalAlign: "-0.0556em" } }), _jsx(_components.span, { className: "mord", children: "0.12%" })] })] })] }), " and the sample standard deviation is ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "s" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "0.80" }), _jsx(_components.mi, { mathvariant: "normal", children: "%" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "s=0.80\\%" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "s" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8056em", verticalAlign: "-0.0556em" } }), _jsx(_components.span, { className: "mord", children: "0.80%" })] })] })] }), ". Test at ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "α" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "5" }), _jsx(_components.mi, { mathvariant: "normal", children: "%" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\alpha=5\\%" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8056em", verticalAlign: "-0.0556em" } }), _jsx(_components.span, { className: "mord", children: "5%" })] })] })] }), " whether the mean excess return is greater than 0 (upper-tailed)."] }), "\n", _jsxs(_components.blockquote, { children: ["\n", _jsxs(_components.p, { children: [_jsx(_components.strong, { children: "Answer:" }), _jsx(_components.br, {}), "\n", "Step 1: Hypotheses."] }), "\n", _jsx(_components.span, { className: "katex-display", children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", display: "block", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }), _jsx(_components.mo, { children: ":" }), _jsx(_components.mi, { children: "μ" }), _jsx(_components.mo, { children: "≤" }), _jsx(_components.mn, { children: "0" }), _jsx(_components.mspace, { width: "1em" }), _jsx(_components.mtext, { children: "vs" }), _jsx(_components.mspace, { width: "1em" }), _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mi, { children: "A" })] }), _jsx(_components.mo, { children: ":" }), _jsx(_components.mi, { children: "μ" }), _jsx(_components.mo, { children: ">" }), _jsx(_components.mn, { children: "0" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0:\\mu\\leq 0 \\quad \\text{vs} \\quad H_A:\\mu>0" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: ":" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8304em", verticalAlign: "-0.1944em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "≤" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", 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style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mathnormal mtight", children: "A" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: ":" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.7335em", verticalAlign: "-0.1944em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "μ" }), _jsx(_components.span, { className: "mspace", style: { marginRight: 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}) })] }), _jsxs(_components.span, { style: { top: "-3.23em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "frac-line", style: { borderBottomWidth: "0.04em" } })] }), _jsxs(_components.span, { style: { top: "-3.4461em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsxs(_components.span, { className: "mord mtight", children: [_jsx(_components.span, { className: "mord accent mtight", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsxs(_components.span, { className: "vlist", style: { height: "0.5678em" }, children: [_jsxs(_components.span, { style: { top: "-2.7em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "mord mathnormal 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height: "2.5em" } }), _jsx(_components.span, { className: "sizing reset-size3 size1 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.143em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.5491em" }, children: _jsx(_components.span, {}) }) })] }) }), _jsx(_components.span, { className: "mclose nulldelimiter" })] })] })] })] })] }), "\n", _jsx(_components.p, { children: "Step 3: Compute. Convert percentages to decimals:" }), "\n", _jsx(_components.span, { className: "katex-display", children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", display: "block", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.mover, { accent: "true", children: [_jsx(_components.mi, { children: "x" }), _jsx(_components.mo, { children: "ˉ" })] }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "0.0012" }), _jsx(_components.mo, { separator: "true", children: "," }), _jsx(_components.mspace, { width: "1em" }), _jsx(_components.mi, { children: "s" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "0.0080" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\bar{x}=0.0012,\\quad s=0.0080" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.5678em" } }), _jsx(_components.span, { className: "mord accent", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsxs(_components.span, { className: "vlist", style: { height: "0.5678em" }, children: [_jsxs(_components.span, { style: { top: "-3em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "x" })] }), _jsxs(_components.span, { style: { top: "-3em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "accent-body", style: { left: "-0.2222em" }, children: _jsx(_components.span, { className: "mord", children: "ˉ" }) })] })] }) }) }) }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8389em", verticalAlign: "-0.1944em" } }), _jsx(_components.span, { className: "mord", children: "0.0012" }), _jsx(_components.span, { className: "mpunct", children: "," }), _jsx(_components.span, { className: "mspace", style: { marginRight: "1em" } }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.1667em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "s" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "0.0080" })] })] })] }) }), "\n", _jsx(_components.p, { children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "t" }), _jsx(_components.mo, { children: "=" }), _jsxs(_components.mfrac, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mn, { children: "0.0012" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mn, { children: "0" })] }), _jsxs(_components.mrow, { children: [_jsx(_components.mn, { children: "0.0080" }), _jsx(_components.mi, { mathvariant: "normal", children: "/" }), _jsx(_components.msqrt, { children: _jsx(_components.mn, { children: "16" }) })] })] }), _jsx(_components.mo, { children: "=" }), _jsxs(_components.mfrac, { children: [_jsx(_components.mn, { children: "0.0012" }), _jsx(_components.mn, { children: "0.0020" })] }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "0.60" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "t=\\frac{0.0012-0}{0.0080/\\sqrt{16}}=\\frac{0.0012}{0.0020}=0.60" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6151em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "t" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: 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{ d: "M95,702\nc-2.7,0,-7.17,-2.7,-13.5,-8c-5.8,-5.3,-9.5,-10,-9.5,-14\nc0,-2,0.3,-3.3,1,-4c1.3,-2.7,23.83,-20.7,67.5,-54\nc44.2,-33.3,65.8,-50.3,66.5,-51c1.3,-1.3,3,-2,5,-2c4.7,0,8.7,3.3,12,10\ns173,378,173,378c0.7,0,35.3,-71,104,-213c68.7,-142,137.5,-285,206.5,-429\nc69,-144,104.5,-217.7,106.5,-221\nl0 -0\nc5.3,-9.3,12,-14,20,-14\nH400000v40H845.2724\ns-225.272,467,-225.272,467s-235,486,-235,486c-2.7,4.7,-9,7,-19,7\nc-6,0,-10,-1,-12,-3s-194,-422,-194,-422s-65,47,-65,47z\nM834 80h400000v40h-400000z" }) }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.1272em" }, children: _jsx(_components.span, {}) }) })] }) })] }) })] }), _jsxs(_components.span, { style: { top: "-3.23em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "frac-line", style: { 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children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1.1901em", verticalAlign: "-0.345em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mopen nulldelimiter" }), _jsx(_components.span, { className: "mfrac", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsxs(_components.span, { className: "vlist", style: { height: "0.8451em" }, children: [_jsxs(_components.span, { style: { top: "-2.655em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0.0020" }) }) })] }), _jsxs(_components.span, { style: { top: "-3.23em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "frac-line", style: { borderBottomWidth: "0.04em" } })] }), _jsxs(_components.span, { style: { top: "-3.394em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0.0012" }) }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.345em" }, children: _jsx(_components.span, {}) }) })] }) }), _jsx(_components.span, { className: "mclose nulldelimiter" })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "0.60" })] })] })] }) }), "\n", _jsx(_components.p, { children: "Step 4: Degrees of freedom: df = 15. For a one-tailed 5% test, the critical t-value is about 1.75 (from a t-table)." }), "\n", _jsxs(_components.p, { children: ["Step 5: Decision.", _jsx(_components.br, {}), "\n", "Since 0.60 < 1.75, fail to reject H₀."] }), "\n", _jsxs(_components.p, { children: ["Step 6: Interpretation.", _jsx(_components.br, {}), "\n", "The sample does not provide enough evidence (at 5%) that the true mean excess return is positive. This does not prove the mean is zero; it indicates the evidence is not strong enough given variability and sample size."] }), "\n"] }), "\n", _jsx(_components.h3, { children: "t-tests in linear regression" }), "\n", _jsx(_components.p, { children: "Regression output reports estimated coefficients and their standard errors. Testing a single coefficient uses a t-statistic:" }), "\n", _jsx(_components.p, { children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "t" }), _jsx(_components.mo, { children: "=" }), _jsxs(_components.mfrac, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.mover, { accent: "true", children: [_jsx(_components.mi, { children: "β" }), _jsx(_components.mo, { children: "^" })] }), _jsx(_components.mo, { children: "−" }), _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "β" }), _jsx(_components.mn, { children: "0" })] })] }), _jsxs(_components.mrow, { children: [_jsx(_components.mtext, { children: "s.e." }), _jsx(_components.mo, { stretchy: "false", children: "(" }), 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children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsxs(_components.span, { className: "vlist", style: { height: "0.9579em" }, children: [_jsxs(_components.span, { style: { top: "-2.7em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "mord mathnormal mtight", style: { marginRight: "0.05278em" }, children: "β" })] }), _jsxs(_components.span, { style: { top: "-2.9634em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "accent-body", style: { left: "-0.1667em" }, children: _jsx(_components.span, { className: "mord mtight", children: "^" }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.1944em" }, children: _jsx(_components.span, {}) }) })] }) }), _jsx(_components.span, { className: "mclose mtight", children: ")" })] }) })] }), _jsxs(_components.span, { style: { top: "-3.23em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "frac-line", style: { borderBottomWidth: "0.04em" } })] }), _jsxs(_components.span, { style: { top: "-3.4461em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsxs(_components.span, { className: "mord mtight", children: [_jsx(_components.span, { className: "mord accent mtight", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsxs(_components.span, { className: "vlist", style: { height: "0.9579em" }, children: [_jsxs(_components.span, { style: { top: "-2.7em" }, children: 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children: "β" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3173em" }, children: _jsxs(_components.span, { style: { top: "-2.357em", marginLeft: "-0.0528em", marginRight: "0.0714em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.5em" } }), _jsx(_components.span, { className: "sizing reset-size3 size1 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.143em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.6555em" }, children: _jsx(_components.span, {}) }) })] }) }), _jsx(_components.span, { className: "mclose nulldelimiter" })] })] })] })] }) }), "\n", _jsx(_components.p, { children: "Degrees of freedom depend on the model:" }), "\n", _jsxs(_components.ul, { children: ["\n", _jsxs(_components.li, { children: ["Single-variable regression: df ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mo, { children: "=" }), _jsx(_components.mi, { children: "n" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mn, { children: "2" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "=n-2" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.3669em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6667em", verticalAlign: "-0.0833em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "n" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } }), _jsx(_components.span, { className: "mbin", children: "−" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "2" })] })] })] })] }), "\n", _jsxs(_components.li, { children: ["Multiple regression with ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mi, { children: "k" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "k" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6944em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.03148em" }, children: "k" })] }) })] }), " explanatory variables: df ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mo, { children: "=" }), _jsx(_components.mi, { children: "n" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mi, { children: "k" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mn, { children: "1" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "=n-k-1" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.3669em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6667em", verticalAlign: "-0.0833em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "n" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } }), _jsx(_components.span, { className: "mbin", children: "−" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.7778em", verticalAlign: "-0.0833em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.03148em" }, children: "k" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } }), _jsx(_components.span, { className: "mbin", children: "−" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { 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_jsx(_components.span, { className: "inner", children: _jsx(_components.span, { className: "mord", children: _jsx(_components.span, { className: "mrel", children: "" }) }) }), _jsx(_components.span, { className: "fix" })] }) }) }) }), _jsx(_components.span, { className: "mrel", children: "=" })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "0" })] })] })] }) }), "\n", _jsx(_components.p, { children: "Confidence interval form:" }), "\n", _jsx(_components.p, { children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: 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children: _jsx(_components.span, { className: "mord", children: "s.e." }) }), _jsx(_components.span, { className: "mopen", children: "(" }), _jsx(_components.span, { className: "mord accent", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsxs(_components.span, { className: "vlist", style: { height: "0.9579em" }, children: [_jsxs(_components.span, { style: { top: "-3em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.05278em" }, children: "β" })] }), _jsxs(_components.span, { style: { top: "-3.2634em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "accent-body", style: { left: "-0.1667em" }, children: _jsx(_components.span, { className: "mord", children: "^" }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.1944em" }, children: _jsx(_components.span, {}) }) })] }) }), _jsx(_components.span, { className: "mclose", children: "))" })] })] })] }) }), "\n", _jsxs(_components.p, { children: ["This links directly to the test decision: if ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "β" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\beta_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8889em", verticalAlign: "-0.1944em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.05278em" }, children: "β" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0528em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), " lies outside the interval, reject ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), "."] }), "\n", _jsx(_components.h2, { children: _jsx(_components.strong, { children: "Testing differences between two population means" }) }), "\n", _jsx(_components.p, { children: "Many FRM questions can be written as “Is performance different from a benchmark?” or “Is the mean of series X different from series Y?” This is a test about a difference in means." }), "\n", _jsx(_components.p, { children: "A general test statistic for comparing two means (allowing for covariance between the series) is:" }), "\n", _jsx(_components.p, { children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "T" }), _jsx(_components.mo, { children: "=" }), _jsxs(_components.mfrac, { children: 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children: "−" }), _jsx(_components.mn, { children: "2" }), _jsx(_components.mtext, { children: "Cov" }), _jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mi, { children: "X" }), _jsx(_components.mo, { separator: "true", children: "," }), _jsx(_components.mi, { children: "Y" }), _jsx(_components.mo, { stretchy: "false", children: ")" })] }) })] })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "T=\\frac{\\bar{X}-\\bar{Y}}{\\sqrt{\\frac{s_X^2}{n}+\\frac{s_Y^2}{n}-2\\text{Cov}(X,Y)}}" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6833em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.13889em" }, children: "T" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { 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mtight", children: "ˉ" }) })] })] }) }) }) })] }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "1.6296em" }, children: _jsx(_components.span, {}) }) })] }) }), _jsx(_components.span, { className: "mclose nulldelimiter" })] })] })] })] }) }), "\n", _jsx(_components.p, { children: "Under the null hypothesis that the means are equal, this statistic is treated as standard normal in the stated framework." }), "\n", _jsx(_components.p, { children: "Practical FRM approach: if you have paired observations (same dates for a fund and its benchmark), define the difference series:" }), "\n", _jsx(_components.p, { children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, 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children: "D" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.2806em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0278em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mathnormal mtight", children: "t" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.07847em" }, children: "X" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.2806em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0785em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 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_jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.2806em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.2222em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mathnormal mtight", children: "t" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] })] })] }) }), "\n", _jsxs(_components.p, { children: ["Then test the mean of ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "D" }), _jsx(_components.mi, { children: "t" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "D_t" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.02778em" }, children: "D" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.2806em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0278em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mathnormal mtight", children: "t" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), " using a one-sample t-test (variance unknown):"] }), "\n", _jsx(_components.p, { children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", 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80h400000v40h-400000z" }) }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.2341em" }, children: _jsx(_components.span, {}) }) })] }) })] }) })] }), _jsxs(_components.span, { style: { top: "-3.23em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "frac-line", style: { borderBottomWidth: "0.04em" } })] }), _jsxs(_components.span, { style: { top: "-3.394em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsxs(_components.span, { className: "mord mtight", children: [_jsx(_components.span, { className: "mord accent mtight", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsxs(_components.span, { className: "vlist", style: { height: "0.8201em" }, children: [_jsxs(_components.span, { style: { top: "-2.7em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "mord mathnormal mtight", style: { marginRight: "0.02778em" }, children: "D" })] }), _jsxs(_components.span, { style: { top: "-2.9523em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "accent-body", style: { left: "-0.1944em" }, children: _jsx(_components.span, { className: "mord mtight", children: "ˉ" }) })] })] }) }) }) }), _jsx(_components.span, { className: "mbin mtight", children: "−" }), _jsx(_components.span, { className: "mord mtight", children: "0" })] }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: 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The chi-square distribution:" }), "\n", _jsxs(_components.ul, { children: ["\n", _jsx(_components.li, { children: "Is bounded below by 0" }), "\n", _jsx(_components.li, { children: "Is right-skewed for small df" }), "\n", _jsx(_components.li, { children: "Becomes more symmetric as df increases" }), "\n"] }), "\n", _jsx(_components.h3, { children: "Testing a single population variance" }), "\n", _jsx(_components.p, { children: "To test whether a population variance equals a hypothesized value:" }), "\n", _jsx(_components.p, { children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }), _jsx(_components.mo, { children: ":" }), 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_jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msup, { children: [_jsx(_components.mi, { children: "χ" }), _jsx(_components.mn, { children: "2" })] }), _jsx(_components.mo, { children: "=" }), _jsxs(_components.mfrac, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mi, { children: "n" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mn, { children: "1" }), _jsx(_components.mo, { stretchy: "false", children: ")" }), _jsxs(_components.msup, { children: [_jsx(_components.mi, { children: "s" }), _jsx(_components.mn, { children: "2" })] })] }), _jsxs(_components.msubsup, { children: [_jsx(_components.mi, { children: "σ" }), _jsx(_components.mn, { children: "0" }), _jsx(_components.mn, { children: "2" })] })] }), _jsx(_components.mo, { children: "∼" }), _jsxs(_components.msubsup, { children: [_jsx(_components.mi, { children: "χ" }), _jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "n" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mn, { children: "1" })] }), _jsx(_components.mn, { children: "2" })] }), _jsx(_components.mspace, { width: "1em" }), _jsx(_components.mtext, { children: "under " }), _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\chi^2=\\frac{(n-1)s^2}{\\sigma_0^2} \\sim \\chi^2_{n-1} \\quad \\text{under } H_0" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1.0085em", verticalAlign: "-0.1944em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", children: "χ" }), _jsx(_components.span, 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"2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsxs(_components.span, { className: "mord mtight", children: [_jsx(_components.span, { className: "mord mathnormal mtight", children: "n" }), _jsx(_components.span, { className: "mbin mtight", children: "−" }), _jsx(_components.span, { className: "mord mtight", children: "1" })] }) })] }), _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.3064em" }, children: _jsx(_components.span, {}) }) })] }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "1em" } }), _jsx(_components.span, { className: "mord text", children: _jsx(_components.span, { className: "mord", children: "under " }) }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] })] })] }) }), "\n", _jsx(_components.p, { children: "This is used in risk settings such as checking whether realized volatility matches a model assumption (for example, whether a pricing model’s volatility input is consistent with observed data over a window)." }), "\n", _jsx(_components.h3, { children: "Chi-square test for conditional heteroskedasticity (regression diagnostics)" }), "\n", _jsx(_components.p, { children: "In regression, conditional heteroskedasticity means the variance of residuals changes with the level of explanatory variables. Even when OLS coefficient estimates remain unbiased and consistent, standard errors can become unreliable, so t-tests and confidence intervals can mislead." }), "\n", _jsx(_components.p, { children: "A common chi-square-based procedure uses an auxiliary regression:" }), "\n", _jsxs(_components.ol, { children: ["\n", _jsxs(_components.li, { children: ["Estimate the original regression and compute residuals ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsxs(_components.mover, { accent: "true", children: [_jsx(_components.mi, { children: "ϵ" }), _jsx(_components.mo, { children: "^" })] }), _jsx(_components.mi, { children: "i" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\hat{\\epsilon}_i" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8444em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord accent", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsxs(_components.span, { className: "vlist", style: { height: "0.6944em" }, children: [_jsxs(_components.span, { style: { top: "-3em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "ϵ" })] }), _jsxs(_components.span, { style: { top: "-3em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "accent-body", style: { left: "-0.1944em" }, children: _jsx(_components.span, { className: "mord", children: "^" }) })] })] }) }) }) }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3117em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "0em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mathnormal mtight", children: "i" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] })] }), "\n", _jsxs(_components.li, { children: ["Regress squared residuals ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msubsup, { children: [_jsxs(_components.mover, { accent: "true", children: [_jsx(_components.mi, { children: "ϵ" }), _jsx(_components.mo, { children: "^" })] }), _jsx(_components.mi, { children: "i" }), _jsx(_components.mn, { children: "2" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\hat{\\epsilon}_i^2" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1.0728em", verticalAlign: "-0.2587em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord accent", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsxs(_components.span, { className: "vlist", style: { height: "0.6944em" }, children: [_jsxs(_components.span, { style: { top: "-3em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "ϵ" })] }), _jsxs(_components.span, { style: { top: "-3em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "accent-body", style: { left: "-0.1944em" }, children: _jsx(_components.span, { className: "mord", children: "^" }) })] })] }) }) }) }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsxs(_components.span, { className: "vlist", style: { height: "0.8141em" }, children: [_jsxs(_components.span, { style: { top: "-2.4413em", marginLeft: "0em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mathnormal mtight", children: "i" }) })] }), _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.2587em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), " on the original explanatory variables"] }), "\n", _jsxs(_components.li, { children: ["Compute ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msup, { children: [_jsx(_components.mi, { children: "R" }), _jsx(_components.mn, { children: "2" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "R^2" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8141em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.00773em" }, children: "R" }), _jsx(_components.span, { className: "msupsub", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.8141em" }, children: _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) })] }) }) }) }) })] })] }) })] }), " from this auxiliary regression and form:", _jsx(_components.br, {}), "\n", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msup, { children: [_jsx(_components.mi, { children: "χ" }), _jsx(_components.mn, { children: "2" })] }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mi, { children: "n" }), _jsxs(_components.msup, { children: [_jsx(_components.mi, { children: "R" }), _jsx(_components.mn, { children: "2" })] })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\chi^2=nR^2" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1.0085em", verticalAlign: "-0.1944em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", children: "χ" }), _jsx(_components.span, { className: "msupsub", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.8141em" }, children: _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) })] }) }) }) }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8141em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "n" }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.00773em" }, children: "R" }), _jsx(_components.span, { className: "msupsub", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.8141em" }, children: _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) })] }) }) }) }) })] })] })] })] })] }), "\n", _jsxs(_components.li, { children: ["Compare to a chi-square critical value with degrees of freedom:", _jsx(_components.br, {}), "\n", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mtext, { children: "df" }), _jsx(_components.mo, { children: "=" }), _jsxs(_components.mfrac, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "k" }), _jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mi, { children: "k" }), _jsx(_components.mo, { children: "+" }), _jsx(_components.mn, { children: "3" }), _jsx(_components.mo, { stretchy: "false", children: ")" })] }), _jsx(_components.mn, { children: "2" })] })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\text{df}=\\frac{k(k+3)}{2}" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6944em" } }), _jsx(_components.span, { className: "mord text", children: _jsx(_components.span, { className: "mord", children: "df" }) }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1.355em", verticalAlign: "-0.345em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mopen nulldelimiter" }), _jsx(_components.span, { className: "mfrac", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsxs(_components.span, { className: "vlist", style: { height: "1.01em" }, children: [_jsxs(_components.span, { style: { top: "-2.655em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) }) })] }), _jsxs(_components.span, { style: { top: "-3.23em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "frac-line", style: { borderBottomWidth: "0.04em" } })] }), _jsxs(_components.span, { style: { top: "-3.485em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsxs(_components.span, { className: "mord mtight", children: [_jsx(_components.span, { className: "mord mathnormal mtight", style: { marginRight: "0.03148em" }, children: "k" }), _jsx(_components.span, { className: "mopen mtight", children: "(" }), _jsx(_components.span, { className: "mord mathnormal mtight", style: { marginRight: "0.03148em" }, children: "k" }), _jsx(_components.span, { className: "mbin mtight", children: "+" }), _jsx(_components.span, { className: "mord mtight", children: "3" }), _jsx(_components.span, { className: "mclose mtight", children: ")" })] }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.345em" }, children: _jsx(_components.span, {}) }) })] }) }), _jsx(_components.span, { className: "mclose nulldelimiter" })] })] })] })] }), _jsx(_components.br, {}), "\n", "where ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mi, { children: "k" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "k" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6944em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.03148em" }, children: "k" })] }) })] }), " is the number of independent variables in the original regression."] }), "\n", _jsxs(_components.li, { children: ["If calculated ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msup, { children: [_jsx(_components.mi, { children: "χ" }), _jsx(_components.mn, { children: "2" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\chi^2" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1.0085em", verticalAlign: "-0.1944em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", children: "χ" }), _jsx(_components.span, { className: "msupsub", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.8141em" }, children: _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) })] }) }) }) }) })] })] }) })] }), " exceeds the critical value, reject the null hypothesis of no conditional heteroskedasticity"] }), "\n"] }), "\n", _jsxs(_components.blockquote, { children: ["\n", _jsxs(_components.p, { children: [_jsx(_components.strong, { children: "Key Term: Conditional heteroskedasticity" }), _jsx(_components.br, {}), "\n", "A pattern where the variance of regression errors depends on the level of one or more explanatory variables; coefficients can remain unbiased, but standard errors (and hypothesis tests) can become unreliable."] }), "\n"] }), "\n", _jsx(_components.h3, { children: "Worked Example 3.1" }), "\n", _jsxs(_components.p, { children: ["A multiple regression uses ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "n" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "120" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "n=120" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "n" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "120" })] })] })] }), " observations and ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "k" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "3" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "k=3" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6944em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.03148em" }, children: "k" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "3" })] })] })] }), " independent variables. A heteroskedasticity check runs the auxiliary regression of ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msubsup, { children: [_jsxs(_components.mover, { accent: "true", children: [_jsx(_components.mi, { children: "ϵ" }), _jsx(_components.mo, { children: "^" })] }), _jsx(_components.mi, { children: "i" }), _jsx(_components.mn, { children: "2" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\hat{\\epsilon}_i^2" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1.0728em", verticalAlign: "-0.2587em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord accent", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsxs(_components.span, { className: "vlist", style: { height: "0.6944em" }, children: [_jsxs(_components.span, { style: { top: "-3em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "ϵ" })] }), _jsxs(_components.span, { style: { top: "-3em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "accent-body", style: { left: "-0.1944em" }, children: _jsx(_components.span, { className: "mord", children: "^" }) })] })] }) }) }) }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsxs(_components.span, { className: "vlist", style: { height: "0.8141em" }, children: [_jsxs(_components.span, { style: { top: "-2.4413em", marginLeft: "0em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mathnormal mtight", children: "i" }) })] }), _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.2587em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), " on the original variables and finds ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msup, { children: [_jsx(_components.mi, { children: "R" }), _jsx(_components.mn, { children: "2" })] }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "0.20" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "R^2=0.20" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8141em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.00773em" }, children: "R" }), _jsx(_components.span, { className: "msupsub", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.8141em" }, children: _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) })] }) }) }) }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "0.20" })] })] })] }), ". Test for conditional heteroskedasticity at ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "α" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "5" }), _jsx(_components.mi, { mathvariant: "normal", children: "%" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\alpha=5\\%" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8056em", verticalAlign: "-0.0556em" } }), _jsx(_components.span, { className: "mord", children: "5%" })] })] })] }), " using ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msup, { children: [_jsx(_components.mi, { children: "χ" }), _jsx(_components.mn, { children: "2" })] }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mi, { children: "n" }), _jsxs(_components.msup, { children: [_jsx(_components.mi, { children: "R" }), _jsx(_components.mn, { children: "2" })] })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\chi^2=nR^2" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1.0085em", verticalAlign: "-0.1944em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", children: "χ" }), _jsx(_components.span, { className: "msupsub", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.8141em" }, children: _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) })] }) }) }) }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8141em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "n" }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.00773em" }, children: "R" }), _jsx(_components.span, { className: "msupsub", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.8141em" }, children: _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) })] }) }) }) }) })] })] })] })] }), "."] }), "\n", _jsxs(_components.blockquote, { children: ["\n", _jsxs(_components.p, { children: [_jsx(_components.strong, { children: "Answer:" }), _jsx(_components.br, {}), "\n", "Step 1: Null and alternative.", _jsx(_components.br, {}), "\n", "H₀: no conditional heteroskedasticity", _jsx(_components.br, {}), "\n", "H_A: conditional heteroskedasticity is present"] }), "\n", _jsxs(_components.p, { children: ["Step 2: Compute test statistic.", _jsx(_components.br, {}), "\n", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msup, { children: [_jsx(_components.mi, { children: "χ" }), _jsx(_components.mn, { children: "2" })] }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mi, { children: "n" }), _jsxs(_components.msup, { children: [_jsx(_components.mi, { children: "R" }), _jsx(_components.mn, { children: "2" })] }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "120" }), _jsx(_components.mo, { children: "×" }), _jsx(_components.mn, { children: "0.20" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "24" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\chi^2=nR^2=120\\times 0.20=24" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1.0085em", verticalAlign: "-0.1944em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", children: "χ" }), _jsx(_components.span, { className: "msupsub", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.8141em" }, children: _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) })] }) }) }) }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8141em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "n" }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.00773em" }, children: "R" }), _jsx(_components.span, { className: "msupsub", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.8141em" }, children: _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) })] }) }) }) }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.7278em", verticalAlign: "-0.0833em" } }), _jsx(_components.span, { className: "mord", children: "120" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } }), _jsx(_components.span, { className: "mbin", children: "×" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "0.20" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "24" })] })] })] })] }), "\n", _jsxs(_components.p, { children: ["Step 3: Degrees of freedom.", _jsx(_components.br, {}), "\n", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mtext, { children: "df" }), _jsx(_components.mo, { children: "=" }), _jsxs(_components.mfrac, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "k" }), _jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mi, { children: "k" }), _jsx(_components.mo, { children: "+" }), _jsx(_components.mn, { children: "3" }), _jsx(_components.mo, { stretchy: "false", children: ")" })] }), _jsx(_components.mn, { children: "2" })] }), _jsx(_components.mo, { children: "=" }), _jsxs(_components.mfrac, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mn, { children: "3" }), _jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mn, { children: "6" }), _jsx(_components.mo, { stretchy: "false", children: ")" })] }), _jsx(_components.mn, { children: "2" })] }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "9" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\text{df}=\\frac{k(k+3)}{2}=\\frac{3(6)}{2}=9" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6944em" } }), _jsx(_components.span, { className: "mord text", children: _jsx(_components.span, { className: "mord", children: "df" }) }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1.355em", verticalAlign: "-0.345em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mopen nulldelimiter" }), _jsx(_components.span, { className: "mfrac", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsxs(_components.span, { className: "vlist", style: { height: "1.01em" }, children: [_jsxs(_components.span, { style: { top: "-2.655em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) }) })] }), _jsxs(_components.span, { style: { top: "-3.23em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "frac-line", style: { borderBottomWidth: "0.04em" } })] }), _jsxs(_components.span, { style: { top: "-3.485em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsxs(_components.span, { className: "mord mtight", children: [_jsx(_components.span, { className: "mord mathnormal mtight", style: { marginRight: "0.03148em" }, children: "k" }), _jsx(_components.span, { className: "mopen mtight", children: "(" }), _jsx(_components.span, { className: "mord mathnormal mtight", style: { marginRight: "0.03148em" }, children: "k" }), _jsx(_components.span, { className: "mbin mtight", children: "+" }), _jsx(_components.span, { className: "mord mtight", children: "3" }), _jsx(_components.span, { className: "mclose mtight", children: ")" })] }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.345em" }, children: _jsx(_components.span, {}) }) })] }) }), _jsx(_components.span, { className: "mclose nulldelimiter" })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1.355em", verticalAlign: "-0.345em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mopen nulldelimiter" }), _jsx(_components.span, { className: "mfrac", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsxs(_components.span, { className: "vlist", style: { height: "1.01em" }, children: [_jsxs(_components.span, { style: { top: "-2.655em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) }) })] }), _jsxs(_components.span, { style: { top: "-3.23em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "frac-line", style: { borderBottomWidth: "0.04em" } })] }), _jsxs(_components.span, { style: { top: "-3.485em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "3em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsxs(_components.span, { className: "mord mtight", children: [_jsx(_components.span, { className: "mord mtight", children: "3" }), _jsx(_components.span, { className: "mopen mtight", children: "(" }), _jsx(_components.span, { className: "mord mtight", children: "6" }), _jsx(_components.span, { className: "mclose mtight", children: ")" })] }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.345em" }, children: _jsx(_components.span, {}) }) })] }) }), _jsx(_components.span, { className: "mclose nulldelimiter" })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "9" })] })] })] })] }), "\n", _jsxs(_components.p, { children: ["Step 4: Critical value approach.", _jsx(_components.br, {}), "\n", "From a chi-square table, the 5% upper critical value for df = 9 is about 16.92."] }), "\n", _jsxs(_components.p, { children: ["Step 5: Decision.", _jsx(_components.br, {}), "\n", "Since 24 > 16.92, reject H₀."] }), "\n", _jsxs(_components.p, { children: ["Step 6: Risk management action.", _jsx(_components.br, {}), "\n", "Treat usual OLS standard errors as unreliable; use heteroskedasticity-consistent (White) standard errors for t-tests, confidence intervals, and F-tests."] }), "\n"] }), "\n", _jsx(_components.h2, { children: _jsx(_components.strong, { children: "F-tests for variance ratios and regression model significance" }) }), "\n", _jsx(_components.h3, { children: "F distribution in hypothesis testing" }), "\n", _jsx(_components.p, { children: "The F distribution arises from a ratio of two scaled chi-square variables. It is used in two common FRM settings:" }), "\n", _jsxs(_components.ol, { children: ["\n", _jsx(_components.li, { children: "Comparing two variances" }), "\n", _jsx(_components.li, { children: "Testing joint hypotheses in regression (overall model significance)" }), "\n"] }), "\n", _jsx(_components.h3, { children: "Comparing two variances" }), "\n", _jsx(_components.p, { children: "To test whether two populations have the same variance:" }), "\n", _jsx(_components.p, { children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }), _jsx(_components.mo, { children: ":" }), _jsxs(_components.msubsup, { children: [_jsx(_components.mi, { children: "σ" }), _jsx(_components.mn, { children: "1" }), _jsx(_components.mn, { children: "2" })] }), _jsx(_components.mo, { children: "=" }), _jsxs(_components.msubsup, { children: [_jsx(_components.mi, { children: "σ" }), _jsx(_components.mn, { children: "2" }), _jsx(_components.mn, { children: "2" })] })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0:\\sigma_1^2=\\sigma_2^2" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: ":" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1.0622em", verticalAlign: "-0.2481em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.03588em" }, children: "σ" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsxs(_components.span, { className: "vlist", style: { height: "0.8141em" }, children: [_jsxs(_components.span, { style: { top: "-2.4519em", marginLeft: "-0.0359em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "1" }) })] }), _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.2481em" }, children: _jsx(_components.span, {}) }) })] }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1.0622em", verticalAlign: "-0.2481em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.03588em" }, children: "σ" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsxs(_components.span, { className: "vlist", style: { height: "0.8141em" }, children: [_jsxs(_components.span, { style: { top: "-2.4519em", marginLeft: "-0.0359em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) })] }), _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.2481em" }, children: _jsx(_components.span, {}) }) })] }) })] })] })] })] }) }), "\n", _jsx(_components.p, { children: "Use the statistic:" }), "\n", _jsx(_components.p, { children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "F" }), _jsx(_components.mo, { children: "=" }), _jsxs(_components.mfrac, { children: [_jsxs(_components.msubsup, { children: [_jsx(_components.mi, { children: "s" }), _jsx(_components.mn, { children: "1" }), _jsx(_components.mn, { children: "2" })] }), _jsxs(_components.msubsup, { children: [_jsx(_components.mi, { children: "s" }), _jsx(_components.mn, { children: "2" }), _jsx(_components.mn, { children: "2" })] })] })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "F=\\frac{s_1^2}{s_2^2}" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6833em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.13889em" }, children: "F" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1.7258em", verticalAlign: "-0.5916em" } }), _jsxs(_components.span, 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_jsx(_components.span, { className: "mord mtight", children: "/" }), _jsx(_components.span, { className: "mord mathnormal mtight", style: { marginRight: "0.03148em" }, children: "k" }), _jsx(_components.span, { className: "mclose mtight", children: ")" })] }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.52em" }, children: _jsx(_components.span, {}) }) })] }) }), _jsx(_components.span, { className: "mclose nulldelimiter" })] })] })] })] }) }), "\n", _jsx(_components.p, { children: "Degrees of freedom:" }), "\n", _jsxs(_components.ul, { children: ["\n", _jsxs(_components.li, { children: ["Numerator df: ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mi, { children: "k" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "k" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6944em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.03148em" }, children: "k" })] }) })] })] }), "\n", _jsxs(_components.li, { children: ["Denominator df: ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "n" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mi, { children: "k" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mn, { children: "1" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "n-k-1" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6667em", verticalAlign: "-0.0833em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "n" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } }), _jsx(_components.span, { className: "mbin", children: "−" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.7778em", verticalAlign: "-0.0833em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.03148em" }, children: "k" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } }), _jsx(_components.span, { className: "mbin", children: "−" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "1" })] })] })] })] }), "\n"] }), "\n", _jsx(_components.p, { children: "Interpretation:" }), "\n", _jsxs(_components.ul, { children: ["\n", _jsx(_components.li, { children: "A large F (small p-value) suggests the model is jointly significant even if some individual t-tests are not" }), "\n"] }), "\n", _jsxs(_components.p, { children: ["This connects to multicollinearity diagnostics: it is common to see a significant F-test and high ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msup, { children: [_jsx(_components.mi, { children: "R" }), _jsx(_components.mn, { children: "2" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "R^2" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8141em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.00773em" }, children: "R" }), _jsx(_components.span, { className: "msupsub", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.8141em" }, children: _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) })] }) }) }) }) })] })] }) })] }), " but insignificant individual t-tests when explanatory variables are highly correlated."] }), "\n", _jsx(_components.h3, { children: "Worked Example 4.1" }), "\n", _jsxs(_components.p, { children: ["A regression of monthly returns on ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "k" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "5" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "k=5" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6944em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.03148em" }, children: "k" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "5" })] })] })] }), " factors uses ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "n" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "60" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "n=60" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "n" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "60" })] })] })] }), " months and produces ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msup, { children: [_jsx(_components.mi, { children: "R" }), _jsx(_components.mn, { children: "2" })] }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mn, { children: "0.63" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "R^2=0.63" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8141em" } }), 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Test whether the model is jointly significant."] }), "\n", _jsxs(_components.blockquote, { children: ["\n", _jsxs(_components.p, { children: [_jsx(_components.strong, { children: "Answer:" }), _jsx(_components.br, {}), "\n", "Step 1: Hypotheses."] }), "\n", _jsx(_components.span, { className: "katex-display", children: _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", display: "block", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }), _jsx(_components.mo, { children: ":" }), _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "β" }), _jsx(_components.mn, { children: "1" })] }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mo, { children: "⋯" }), 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className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.05278em" }, children: "β" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3117em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0528em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mathnormal mtight", style: { marginRight: "0.05724em" }, children: "j" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.2861em" }, children: _jsx(_components.span, {}) }) })] }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsxs(_components.span, { className: "mrel", children: [_jsx(_components.span, { className: "mrel", children: _jsx(_components.span, { className: "mord vbox", children: _jsx(_components.span, { className: "thinbox", children: _jsxs(_components.span, { className: "rlap", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8889em", verticalAlign: "-0.1944em" } }), _jsx(_components.span, { className: "inner", children: _jsx(_components.span, { className: "mord", children: _jsx(_components.span, { className: "mrel", children: "" }) }) }), _jsx(_components.span, { className: "fix" })] }) }) }) }), _jsx(_components.span, { className: "mrel", children: "=" })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "0" })] })] })] }) }), "\n", _jsxs(_components.p, { children: ["Step 2: Compute F-statistic.", _jsx(_components.br, {}), "\n", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "F" }), _jsx(_components.mo, { children: "=" }), _jsxs(_components.mfrac, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mn, { children: "0.63" }), _jsx(_components.mi, { mathvariant: "normal", children: "/" }), _jsx(_components.mn, { children: "5" }), _jsx(_components.mo, { stretchy: "false", children: ")" })] }), _jsxs(_components.mrow, { children: [_jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mn, { children: "1" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mn, { children: "0.63" }), _jsx(_components.mo, { stretchy: "false", children: ")" }), _jsx(_components.mi, { mathvariant: "normal", children: "/" }), _jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mn, { children: "60" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mn, { children: "5" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mn, { children: "1" }), _jsx(_components.mo, { stretchy: "false", children: ")" }), _jsx(_components.mo, { stretchy: "false", children: ")" })] })] }), _jsx(_components.mo, { children: "=" }), _jsxs(_components.mfrac, { children: [_jsx(_components.mn, { children: "0.126" }), _jsxs(_components.mrow, { children: [_jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mn, { children: "0.37" }), _jsx(_components.mi, { mathvariant: "normal", children: "/" }), _jsx(_components.mn, { children: "54" }), _jsx(_components.mo, { stretchy: "false", children: ")" })] })] }), _jsx(_components.mo, { children: "=" }), _jsxs(_components.mfrac, { children: [_jsx(_components.mn, { children: "0.126" }), _jsx(_components.mn, { children: "0.00685" })] }), _jsx(_components.mo, { children: "≈" }), _jsx(_components.mn, { children: "18.39" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "F=\\frac{(0.63/5)}{((1-0.63)/(60-5-1))}=\\frac{0.126}{(0.37/54)}=\\frac{0.126}{0.00685}\\approx 18.39" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6833em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.13889em" }, children: "F" 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className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.52em" }, children: _jsx(_components.span, {}) }) })] }) }), _jsx(_components.span, { className: "mclose nulldelimiter" })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1.1901em", verticalAlign: "-0.345em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mopen nulldelimiter" }), _jsx(_components.span, { className: "mfrac", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: 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className: "mord mtight", children: "0.126" }) }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.345em" }, children: _jsx(_components.span, {}) }) })] }) }), _jsx(_components.span, { className: "mclose nulldelimiter" })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "≈" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "18.39" })] })] })] })] }), "\n", _jsxs(_components.p, { children: ["Step 3: Degrees of freedom.", _jsx(_components.br, {}), "\n", "Numerator df = 5, denominator df = 54."] }), "\n", _jsxs(_components.p, { children: ["Step 4: Decision.", _jsx(_components.br, {}), "\n", "The 5% critical value for F(5, 54) is around 2.39, so 18.39 is far above it. Reject H₀."] }), "\n", _jsxs(_components.p, { children: ["Step 5: Interpretation.", _jsx(_components.br, {}), "\n", "The factor set is jointly related to the dependent variable. This does not mean each factor matters individually; use t-tests (and consider multicollinearity and robust standard errors) for coefficient-level statements."] }), "\n"] }), "\n", _jsx(_components.h3, { children: _jsx(_components.strong, { children: "Exam Warning" }) }), "\n", _jsxs(_components.blockquote, { children: ["\n", _jsx(_components.p, { children: "Common FRM exam errors in z, t, chi-square, and F testing:" }), "\n", _jsxs(_components.ul, { children: ["\n", _jsx(_components.li, { children: "Writing a null hypothesis without an equality (=, ≤, or ≥). The null includes equality." }), "\n", _jsx(_components.li, { children: "Using a two-tailed critical value when the alternative is one-tailed (and forgetting that two-tailed p-values double the one-tail area)." }), "\n", _jsx(_components.li, { children: "Saying “accept H₀.” The correct statement is “fail to reject H₀.”" }), "\n", _jsx(_components.li, { children: "Using σ/√n when σ is not given (use s/√n and a t reference)." }), "\n", _jsx(_components.li, { children: "Forgetting degrees of freedom (mean t-test df = n-1; single regression df = n-2; multiple regression df = n-k-1)." }), "\n", _jsx(_components.li, { children: "For F tests of variances, not controlling which variance is in the numerator (F tables depend on df order and F is not symmetric)." }), "\n", _jsx(_components.li, { children: "In heteroskedasticity, concluding coefficients are biased. The typical issue is unreliable standard errors; use White standard errors for inference." }), "\n"] }), "\n"] }), "\n", _jsx(_components.h2, { children: _jsx(_components.strong, { children: "Multiple testing and model risk in finance" }) }), "\n", _jsxs(_components.p, { children: ["Multiple testing means running many hypothesis tests on the same data set (for example, screening $", "10", " strategies, many factors, or many VaR model variants). The single-test significance level ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mi, { children: "α" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\alpha" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" })] }) })] }), " does not remain the true false-positive rate once you test repeatedly. As the number of tests grows, it becomes more likely that at least one test rejects ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), " purely by chance."] }), "\n", _jsx(_components.p, { children: "Risk management consequences:" }), "\n", _jsxs(_components.ul, { children: ["\n", _jsx(_components.li, { children: "Strategy research: selecting “best” backtests can lead to overstated expected return and understated risk" }), "\n", _jsx(_components.li, { children: "Model selection: repeated specification searches can yield unstable coefficients and weak out-of-sample performance" }), "\n", _jsx(_components.li, { children: "Governance: without controls (pre-specified hypotheses, holdout samples), reported p-values can mislead decision-makers" }), "\n"] }), "\n", _jsx(_components.p, { children: "Practical controls (conceptually important for FRM candidates):" }), "\n", _jsxs(_components.ul, { children: ["\n", _jsx(_components.li, { children: "Pre-specify hypotheses before looking at results when possible" }), "\n", _jsx(_components.li, { children: "Reserve a holdout sample for confirmation" }), "\n", _jsx(_components.li, { children: "Use adjustments such as Bonferroni-type controls when many tests are run, or use false-discovery-rate methods in large screening exercises" }), "\n", _jsx(_components.li, { children: "Treat statistical significance as one input; also assess economic magnitude and implementation costs (transaction costs, constraints, liquidity)" }), "\n"] }), "\n", _jsx(_components.h2, { children: _jsx(_components.strong, { children: "Summary" }) }), "\n", _jsx(_components.p, { children: "Hypothesis testing is a structured way to decide whether sample evidence is consistent with a maintained statement about a population parameter. For FRM work, the process is as important as the arithmetic: correct hypotheses (with equality in the null), correct tail choice, correct reference distribution, and correct interpretation using Type I/II error concepts." }), "\n", _jsx(_components.p, { children: "z- and t-tests are most often used for means and regression coefficients, with the main selection issue being whether the population variance is known and whether the sample is large enough for normal approximations. Chi-square tests commonly appear in variance testing and regression diagnostics such as heteroskedasticity checks. F tests appear in variance comparisons and, centrally for FRM, in testing overall regression significance and joint hypotheses." }), "\n", _jsx(_components.h2, { children: _jsx(_components.strong, { children: "Key Point Checklist" }) }), "\n", _jsx(_components.p, { children: _jsx(_components.em, { children: "This article has covered the following key knowledge points:" }) }), "\n", _jsxs(_components.ul, { children: ["\n", _jsxs(_components.li, { children: ["The six components of a hypothesis test: ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), ", ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mi, { children: "A" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_A" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3283em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mathnormal mtight", children: "A" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] }), ", test statistic, ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mi, { children: "α" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\alpha" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" })] }) })] }), ", critical value(s), decision rule"] }), "\n", _jsx(_components.li, { children: "One-tailed vs two-tailed tests determined by the alternative hypothesis" }), "\n", _jsxs(_components.li, { children: ["Type I error (controlled by ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mi, { children: "α" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\alpha" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" })] }) })] }), ") vs Type II error and power trade-offs"] }), "\n", _jsxs(_components.li, { children: ["p-value definition and the rule p-value ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mo, { children: "<" }), _jsx(_components.mi, { children: "α" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "<\\alpha" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.5782em", verticalAlign: "-0.0391em" } }), _jsx(_components.span, { className: "mrel", children: "<" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" })] })] })] }), " implies rejection"] }), "\n", _jsx(_components.li, { children: "Confidence interval linkage: reject when hypothesized value lies outside the CI" }), "\n", _jsxs(_components.li, { children: ["z-test for means when ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mi, { children: "σ" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\sigma" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.03588em" }, children: "σ" })] }) })] }), " is known: ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: "z" }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mo, { stretchy: "false", children: "(" }), _jsxs(_components.mover, { accent: "true", children: [_jsx(_components.mi, { children: "x" }), _jsx(_components.mo, { children: "ˉ" })] }), _jsx(_components.mo, { children: "−" }), _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "μ" }), _jsx(_components.mn, { children: "0" })] }), _jsx(_components.mo, { stretchy: "false", children: ")" }), _jsx(_components.mi, { mathvariant: "normal", children: "/" }), 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className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mi, { children: "σ" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\sigma" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.03588em" }, children: "σ" })] }) })] }), " is unknown: ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mi, { children: 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className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6151em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "t" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1em", verticalAlign: "-0.25em" } }), _jsx(_components.span, { className: "mopen", children: "(" }), _jsx(_components.span, { className: "mord accent", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsxs(_components.span, { className: "vlist", style: { height: "0.5678em" }, children: 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}), _jsx(_components.span, { className: "hide-tail", style: { minWidth: "0.853em", height: "1.08em" }, children: _jsx(_components.svg, { xmlns: "http://www.w3.org/2000/svg", width: "400em", height: "1.08em", viewBox: "0 0 400000 1080", preserveAspectRatio: "xMinYMin slice", children: _jsx(_components.path, { d: "M95,702\nc-2.7,0,-7.17,-2.7,-13.5,-8c-5.8,-5.3,-9.5,-10,-9.5,-14\nc0,-2,0.3,-3.3,1,-4c1.3,-2.7,23.83,-20.7,67.5,-54\nc44.2,-33.3,65.8,-50.3,66.5,-51c1.3,-1.3,3,-2,5,-2c4.7,0,8.7,3.3,12,10\ns173,378,173,378c0.7,0,35.3,-71,104,-213c68.7,-142,137.5,-285,206.5,-429\nc69,-144,104.5,-217.7,106.5,-221\nl0 -0\nc5.3,-9.3,12,-14,20,-14\nH400000v40H845.2724\ns-225.272,467,-225.272,467s-235,486,-235,486c-2.7,4.7,-9,7,-19,7\nc-6,0,-10,-1,-12,-3s-194,-422,-194,-422s-65,47,-65,47z\nM834 80h400000v40h-400000z" }) }) })] })] }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: 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_jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6667em", verticalAlign: "-0.0833em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "n" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } }), _jsx(_components.span, { className: "mbin", children: "−" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6444em" } }), _jsx(_components.span, { className: "mord", children: "1" })] })] })] })] }), "\n", _jsx(_components.li, { children: "Testing equality of two means via a standardized difference and (often) a difference series" }), "\n", _jsxs(_components.li, { children: ["Chi-square variance test: ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsxs(_components.msup, { children: [_jsx(_components.mi, { children: "χ" }), _jsx(_components.mn, { children: "2" })] }), _jsx(_components.mo, { children: "=" }), _jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mi, { children: "n" }), _jsx(_components.mo, { children: "−" }), _jsx(_components.mn, { children: "1" }), _jsx(_components.mo, { stretchy: "false", children: ")" }), _jsxs(_components.msup, { children: [_jsx(_components.mi, { children: "s" }), _jsx(_components.mn, { children: "2" })] }), _jsx(_components.mi, { mathvariant: "normal", children: "/" }), _jsxs(_components.msubsup, { children: [_jsx(_components.mi, { children: "σ" }), _jsx(_components.mn, { children: "0" }), _jsx(_components.mn, { children: "2" })] })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\chi^2=(n-1)s^2/\\sigma_0^2" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1.0085em", verticalAlign: "-0.1944em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", children: "χ" }), _jsx(_components.span, { className: "msupsub", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.8141em" }, children: _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: 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"strut", style: { height: "1.0641em", verticalAlign: "-0.25em" } }), _jsx(_components.span, { className: "mord", children: "1" }), _jsx(_components.span, { className: "mclose", children: ")" }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", children: "s" }), _jsx(_components.span, { className: "msupsub", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.8141em" }, children: _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) })] }) }) }) }) })] }), _jsx(_components.span, { className: "mord", children: "/" }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.03588em" }, children: "σ" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsxs(_components.span, { className: "vlist", style: { height: "0.8141em" }, children: [_jsxs(_components.span, { style: { top: "-2.4519em", marginLeft: "-0.0359em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }), _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing 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[_jsx(_components.mi, { children: "R" }), _jsx(_components.mn, { children: "2" })] })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\chi^2=nR^2" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1.0085em", verticalAlign: "-0.1944em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", children: "χ" }), _jsx(_components.span, { className: "msupsub", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.8141em" }, children: _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) })] }) }) }) }) })] }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8141em" } }), _jsx(_components.span, { className: "mord mathnormal", children: "n" }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.00773em" }, children: "R" }), _jsx(_components.span, { className: "msupsub", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.8141em" }, children: _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) })] }) }) }) }) })] })] })] })] }), " with df ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsxs(_components.mrow, { children: [_jsx(_components.mo, { children: "=" }), _jsx(_components.mi, { children: "k" }), _jsx(_components.mo, { stretchy: "false", children: "(" }), _jsx(_components.mi, { children: "k" }), _jsx(_components.mo, { children: "+" }), _jsx(_components.mn, { children: "3" }), _jsx(_components.mo, { stretchy: "false", children: ")" }), _jsx(_components.mi, { mathvariant: "normal", children: "/" }), _jsx(_components.mn, { children: "2" })] }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "=k(k+3)/2" })] }) }) }), _jsxs(_components.span, { className: "katex-html", "aria-hidden": "true", children: [_jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.3669em" } }), _jsx(_components.span, { className: "mrel", children: "=" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2778em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1em", verticalAlign: "-0.25em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.03148em" }, children: "k" }), _jsx(_components.span, { className: "mopen", children: "(" }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.03148em" }, children: "k" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } }), _jsx(_components.span, { className: "mbin", children: "+" }), _jsx(_components.span, { className: "mspace", style: { marginRight: "0.2222em" } })] }), _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "1em", verticalAlign: "-0.25em" } }), _jsx(_components.span, { className: "mord", children: "3" }), _jsx(_components.span, { className: "mclose", children: ")" }), _jsx(_components.span, { className: "mord", children: "/2" })] })] })] })] }), "\n", _jsxs(_components.li, { children: ["F tests for variance ratios and for joint significance in regression, including ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mi, { children: "F" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "F" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.6833em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.13889em" }, children: "F" })] }) })] }), " from ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msup, { children: [_jsx(_components.mi, { children: "R" }), _jsx(_components.mn, { children: "2" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "R^2" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8141em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.00773em" }, children: "R" }), _jsx(_components.span, { className: "msupsub", children: _jsx(_components.span, { className: "vlist-t", children: _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.8141em" }, children: _jsxs(_components.span, { style: { top: "-3.063em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "2" }) })] }) }) }) }) })] })] }) })] })] }), "\n", _jsx(_components.li, { children: "Multiple testing raises the chance of false positives and can bias reported results" }), "\n"] }), "\n", _jsx(_components.h2, { children: _jsx(_components.strong, { children: "Key Terms and Concepts" }) }), "\n", _jsxs(_components.ul, { children: ["\n", _jsx(_components.li, { children: "hypothesis test" }), "\n", _jsxs(_components.li, { children: ["null hypothesis ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mn, { children: "0" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_0" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3011em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mtight", children: "0" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] })] }), "\n", _jsxs(_components.li, { children: ["alternative hypothesis ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsxs(_components.msub, { children: [_jsx(_components.mi, { children: "H" }), _jsx(_components.mi, { children: "A" })] }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "H_A" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.8333em", verticalAlign: "-0.15em" } }), _jsxs(_components.span, { className: "mord", children: [_jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.08125em" }, children: "H" }), _jsx(_components.span, { className: "msupsub", children: _jsxs(_components.span, { className: "vlist-t vlist-t2", children: [_jsxs(_components.span, { className: "vlist-r", children: [_jsx(_components.span, { className: "vlist", style: { height: "0.3283em" }, children: _jsxs(_components.span, { style: { top: "-2.55em", marginLeft: "-0.0813em", marginRight: "0.05em" }, children: [_jsx(_components.span, { className: "pstrut", style: { height: "2.7em" } }), _jsx(_components.span, { className: "sizing reset-size6 size3 mtight", children: _jsx(_components.span, { className: "mord mathnormal mtight", children: "A" }) })] }) }), _jsx(_components.span, { className: "vlist-s", children: "" })] }), _jsx(_components.span, { className: "vlist-r", children: _jsx(_components.span, { className: "vlist", style: { height: "0.15em" }, children: _jsx(_components.span, {}) }) })] }) })] })] }) })] })] }), "\n", _jsx(_components.li, { children: "one-tailed test" }), "\n", _jsx(_components.li, { children: "two-tailed test" }), "\n", _jsx(_components.li, { children: "test statistic" }), "\n", _jsx(_components.li, { children: "standard error" }), "\n", _jsxs(_components.li, { children: ["significance level (test size) ", _jsxs(_components.span, { className: "katex", children: [_jsx(_components.span, { className: "katex-mathml", children: _jsx(_components.math, { xmlns: "http://www.w3.org/1998/Math/MathML", children: _jsxs(_components.semantics, { children: [_jsx(_components.mrow, { children: _jsx(_components.mi, { children: "α" }) }), _jsx(_components.annotation, { encoding: "application/x-tex", children: "\\alpha" })] }) }) }), _jsx(_components.span, { className: "katex-html", "aria-hidden": "true", children: _jsxs(_components.span, { className: "base", children: [_jsx(_components.span, { className: "strut", style: { height: "0.4306em" } }), _jsx(_components.span, { className: "mord mathnormal", style: { marginRight: "0.0037em" }, children: "α" })] }) })] })] }), "\n", _jsx(_components.li, { children: "Type I error" }), "\n", _jsx(_components.li, { children: "Type II error" }), "\n", _jsx(_components.li, { children: "power of a test" }), "\n", _jsx(_components.li, { children: "critical value" }), "\n", _jsx(_components.li, { children: "p-value" }), "\n", _jsx(_components.li, { children: "confidence interval" }), "\n", _jsx(_components.li, { children: "degrees of freedom" }), "\n", _jsx(_components.li, { children: "z-test" }), "\n", _jsx(_components.li, { children: "t-test" }), "\n", _jsx(_components.li, { children: "chi-square test" }), "\n", _jsx(_components.li, { children: "F-test" }), "\n", _jsx(_components.li, { children: "conditional heteroskedasticity" }), "\n", _jsx(_components.li, { children: "White standard errors" }), "\n", _jsx(_components.li, { children: "multiple testing" }), "\n"] })] }); } function MDXContent(props = {}) { const {wrapper: MDXLayout} = { ..._provideComponents(), ...props.components }; return MDXLayout ? _jsx(MDXLayout, { ...props, children: _jsx(_createMdxContent, { ...props }) }) : _createMdxContent(props); } return { default: MDXContent };

Hypothesis testing - t, z, chi-square, and F tests